Depreciation and amortization are treated like fixed costs:

		in the calculation of the degree of pretax cash flow operating leverage.
		in the calculation of the degree of accounting operating leverage.
		for cash flow purposes.
		for computing dividend.

2.5 points

QUESTION 4

If the degree of accounting operating leverage is 1.3 for a firm, then a 10 percent increase in revenue should drive a:

		12% increase in pretax operating cash flows.
		13% increase in EBIT.
		30% increase in EBIT.
		1.3% increase in pretax operating cash flows.

2.5 points

QUESTION 5

Which is the term used to define how many units must be sold for pre-tax operating cash flow to be equal to zero?

		Pre-tax accounting operating profit break-even point
		Pre-tax operating financial leverage break-even point
		Pre-tax accounting sensitivity break-even point
		Pre-tax operating cash flow break-even point

2.5 points

QUESTION 6

The difference between revenue and variable cost is called:

		total contribution.
		net profit.
		EBIT.
		EAT.

2.5 points

QUESTION 7

Which of the following statements is true of the economic break-even point?

		It is the number of units that must be sold for accounting operating profit to equal $0.
		It is the level of unit sales at which cash flows or profitability for one project alternative switches from being lower than that of another alternative to being higher.
		It is the number of units that must be sold each year during the life of a project so that the NPV of a project equals $0.
		It is the number of units that must be sold for pretax operating cash flow to be $0.

2.5 points

QUESTION 8

Astroscope Tours finds that if it were to increase its price by 10 percent, it would have a 6 percent reduction in the NPV of its new 3-Hour Tour. Considering other things to be unchanged, Astroscope's analysis could be described as:

		Monte Carlo simulation.
		break-even analysis.
		sensitivity analysis.
		variance analysis.

2.5 points

QUESTION 9

If a firm were interested in knowing the effect of a single input change on the net present value of a project, then the firm would most likely want to perform:

		a Monte Carlo simulation.
		a scenario analysis.
		a sensitivity analysis.
		a break-even analysis.

2.5 points

QUESTION 10

Scenario analysis can help a firm to:

		understand the degree of uncertainty that a different set of project-affecting circumstances may hold.
		eliminate all of the uncertainty that a different set of project-affecting circumstances may hold.
		transform a risky project into a risk-free project.
		understand the degree of certainty that a similar set of project-affecting circumstances may hold