The Degree of Combined Leverage is

Sales (75,000 units)	$750,000
Variable costs	225,000
Contribution margin	$525,000
Fixed manufacturing costs	187,500
Operating income	$337,500
Interest	75,000
Earnings before taxes	$262,500
Taxes (at 31%)	81,375
Net Income	$181,125
Shares outstanding	15,000

Select one:

A. 2.2x

B. 1.9x

C. 2.9x

D. 2.0x

Question 33

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Which of the following equally risky investments offers you the highest return?

Select one:

A. one that pays interest at 10 % quarterly

B. one that pays interest at 10 % monthly

C. one that pays interest at 10.2 % annually

D. one that pays interest at 9.6% daily (365-day basis)

Question 34

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You have to choose between receiving one of two equally risky annuities, each paying $1,000 per year for 10 years. One is an annuity due, while the other is an ordinary annuity. Which would you choose?

Select one:

A. The annuity due.

B. The ordinary annuity.

C. No preference, they are of equal value.

D. Information provided is insufficient to make a choice.

E. The annuity due; however, if the payments on both were doubled to $2,000 the deferred annuity would be preferred.

Question 35

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Today, Edgar and Eleanor each have $150,000 in an investment account. No other contributions will be made to their investment accounts. Both have the same goal: They each want their account to reach $1 million, at which time each will retire. Edgar has his money invested in low-risk securities with an expected annual return of 5 percent. Eleanor has her money invested in a stock fund with an expected annual return of 10 percent. How many years after Eleanor retires will Edgar retire?

Select one:

A. 12.6

B. 19.0

C. 19.9

D. 29.4

E. 38.9

Question 36

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You've won the lottery and can choose to (a) receive $1 million in 50 years, or (b)receive $2,000 today. Assuming you can invest at 14%, which should you choose?

Select one:

A. the $1 million dollars in 50 years.

B. $2,000 today.

C. she should be indifferent.

D. need more information.

Question 37

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How much must you invest at 10% interest in order to see your investment grow to $5,000 in 5 years?

Select one:

A. $3,070

B. $3,415

C. $3,105

D. $none of the above

Question 38

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Jane has $120,000 and wants to retire. What return must her money earn so she may receive annual benefits of $20,000 for the next 14 years.

Select one:

A. 12%

B. Between 12% and 13%

C. 14%

D. Greater than 15%

Question 39

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John borrowed $125,000 to buy a house. His loan cost was 11% and he promised to repay the loan in 15 equal annual payments. How much are the annual payments?

Select one:

A. $3,633

B. $9,250

C. $13,113

D. $17,383

Question 40

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The future value of a $1000 investment today at 8 percent annual interest compounded semiannually for 5 years is

Select one:

A. $1,469

B. $1,480

C. $1,520

D. $1,555