Finance Exam 3

CH 9Interest rate parity exists because:A. there are investors who stand ready to engage in arbitrageB. central banks ensure the relationship holds to protect currency valuesC. inflation is the same in all industrialized countriesD. transactions costs and taxes make markets inefficient A. there are investors who stand ready to engage in arbitrage
CH 9Using the weighted average cost of capital as the required rate of return for every project will:A. cause a firm to reject projects that should have been acceptedB. cause a firm to accept projects that were too riskyC. result in maximization of shareholder wealthD. cause a firm to reject projects that should have been accepted and cause a firm to accept projects that were too risky D. cause a firm to reject projects that should have been accepted and cause a firm to accept projects that were too risky
Ch 9Which of the following causes a firm’s cost of capital (WACC) to differ from an investor’s required rate of return on the company’s common stock?A. the fact that the risk free rate of interest has increasesB. the incurrence of flotation costs when new securities are issuedC. the market risk premium exceeds 12%D. none of these – the WACC and required return are the same B. the incurrence of flotation costs when new securities are issued
Ch 9Higher flotation costs will result in all of the following except:A. higher after-tax cost of debtB. higher weighted average cost of debtC. higher cost of retained earningsD. higher cost of common equity when new common shares are sold C. higher cost of retained earnings
Ch 9Why should forms that own and operate multiple businesses that have different risk characteristics use business-specific, or divisional costs of capital?A. not all divisions have equal risk and the firm might accept projects whose returns are higher than are deemed appropriateB. not all business divisions have equal risk and the firm will likely become less risky in the futureC. not all lines of business have equal risk and it is likely that the firm will accept projects whose returns are unacceptably low in relation to the risk involvedD. use of the same weighted average cost of capital for all divisions may result in too much money being allocated to the least risky division C. not all lines of business have equal risk and it is likely that the firm will accept projects whose returns are unacceptably low in relation to the risk involved
Ch 9Which of the following should not be considered when calculating a firm’s WACC?A. cost of preferred stockB. after-tax cost of bondsC. cost of common stockD. cost carrying inventory D. cost carrying inventory
CH 9All of the following variables are used in computing the cost of debt except:A. maturity value of the debtB. market price of the debtC. number of years to maturityD. risk-free rate D. risk-free rate
Ch 9Joe’s Discount Club currently have a weighted average cost of capital of 12%. Joe’s has been growing rapidly over the past several years, selling common stock in each year to finance its growth. However, due to difficult economic times this year, Joe decides to cut its dividend and increase its retained earnings so that the common equity portion of its capital structure will include only retained earnings and no new common stock will be sold. Joe’s weighted average cost of capital this year should beA. zero, since no new stock will be soldB. less than 12%C. equal to 12%D. greater than 12% B. less than 12%
Ch 9Due to changes in regulatory requirements, the transactions costs associated with selling corporate securities increased by $1 per share. This change willA. cause the cost of capital to decreaseB. cause the cost of capital to increaseC. have no effect on the cost of capital because transactions costs are expensed immediatelyD. cause the cost of capital to decrease only if investors may be billed for part of the increase in transactions costs B. cause the cost of capital to increase
Ch 9Asian Trading Company paid a dividend yesterday of $5 per share (D0 = $4). The dividend is expected to grow at a constant rate of 8% per year. The price of Asian Trading Company’s stock today is $29 per share. If Asian Trading Company decides to issue new common stock, flotation costs will equal $2.50 per share. Asian Trading Company’s marginal tax rate is 35%. Based on the above information, the cost of retained earnings is:A. 28.38%B. 24.12%C. 26.62%D. 31.40% C. 26.62%
CH 9KayCee Manufacturing Company paid a dividend yesterday of $3.50 per share. The dividend is expected to grow at a constant rate of 10% per year. The price of KayCee’s common stock today is $40 per share. If KayCee decides to issue new common stock, flotation costs will equal $4 per share. KayCee’s marginal tax rate is 35%. Based on the above information, the cost of retained earnings is:A. 26.41%B. 20.09%C. 19.63%D. 17.55% C. 19.63%
Ch 9Jiffy Co. experts to pay a dividend of $3 per share in one year. The current price of Jiffy common stock is $60 per share. Flotation costs are $3 per share when Jiffy issues new stock. What is the cost of internal common equity (retained earnings) if the long-term growth in dividends is projected to be 8% indefinitely?A. 13%B. 14%C. 15%D. 16% A. 13%
CH 9Durocorp has a target captial structure of 30% debt and 70% equity. Durocorp is planning to invest in a project that will necessitate raising new capital. New debt will be issued at a before-tax yield of 14%, with a coupon rate of 10%. The equity will be provided by internally generated funds so no new outside equity will be issued. If the required rate of return on the firm’s stock is 22% and its marginal tax rate is 35%, compute the firm’s cost of capital.A. 18%B. 18.13%C. 19.68%D. 15.55% B. 18.13%
Ch 9A corporate bond has a face value of $1,000 and a coupon rate of 9%. The bond matures in 14 years and has a current market price of $946. If the corporation sells more bonds it will incur flotation costs of $26 per bond. If the corporate tax rate is 35%, what is the after-tax cost of debt capital?A. 5.57%B. 6.56%C. 8.18%D. 7.31% B. 6.56%
Ch 9Clothier, Inc. has a target capital structure of 40% debt and 60% common equity, and has a 40% marginal tax rate. If Clothier’s yield to maturity on bonds is 7.5% and investors require a 15% return of Clothier’s common stock, what is the firm’s weighted average cost of capital?A. 7.2%B. 10.8%C. 12%D. 12.25% B. 10.8%
CH 9Which of the following should NOT be considered when calculating a firm’s WACC?A. After-tax YTM on a firm’s bondsB. After-tax cost of accounts payableC. Cost of newly issued preferred stockD. Cost of newly issued common stock B. After-tax cost of accounts payable
CH 9Acme Conglomerate Corporation operates three divisions. One division involves significant research and development, and thus has a high-risk cost of capital of 15%. The second division operates in business segments related to Acme’s core business, and this division has a cost of capital of 10% based upon its risk. Acme’s core business is the least risky segment, with a cost of capital of 8%. The firm’s overall weighted average cost of capital of 11% has been used to evaluate capital budgeting projects for all three divisions. This approach willA. favor projects in the core business division because that division is the least riskB. favor projects in the related business division because the cost of capital for this division is the closest to the firm’s weighted average cost of capitalC. favor projects in the research and development division because the higher risk projects look more favorable if a lower cost of capital is used to evaluate themD. not favor any division over the other because they will all use the same company-wide weighted average cost of capital C. favor projects in the research and development division because the higher risk projects look more favorable if a lower cost of capital is used to evaluate them
CH 9 In general, which of the following rankings, from highest to lowest cost, is most accurate?A. cost of new common stock, cost of preferred stock, cost of debt, cost of retained earningsB. cost of debt, cost of preferred stock, cost of new common stock, cost of retained earningsC. cost of new common stock, cost of retained earnings, cost of preferred stock, cost of debtD. cost of preferred stock, cost of new common stock, cost of retained earnings, cost of debt C. cost of new common stock, cost of retained earnings, cost of preferred stock, cost of debt
CH 9Which of the following differentiates the cost of retained earnings from the cost of newly-issued common stock?A. The cost of the preemptive rights held by existing shareholdersB. The greater marginal tax rate faced by the now-larger firmC. The flotation costs incurred when issuing new securitiesD. The larger dividends paid to the new common stockholders C. The flotation costs incurred when issuing new securities
CH 9A US company can borrow 12,000 pounds in Great Britain for 4% interest, paying back 12,480 pounds in one year. Alternatively, the US company can borrow an equivalent amount of US dollars in the US and pay 8% interest. Assuming capital markets are efficient, estimate the expected inflation rate in the US if inflation is Great Britain is expected to be zero.A. 5.02%B. 4.16%C. 4%D. 3.85% D. 3.85%
CH 9The average cost associated with each additional dollar of financing for investment projects is:A. the incremental returnB. the marginal cost of capitalC. CAPM required returnD. the component cost of capital B. the marginal cost of capital
CH 9Interest rate parity exists becauseA. there are investors who stand ready to engage in arbitrageB. central banks ensure the relationship holds to protect currency valuesC. inflation is the same in all industrialized countriesD. transactions cost and taxes make markets inefficient A. there are investors who stand ready to engage in arbitrage
CH 9Which of the following should not be considered when calculating a firm’s WACC?A. cost of preferred stockB. after-tax cost of bondsC. cost of common stockD. cost of carrying inventory D. cost of carrying inventory
Joe’s Discount Club currently has a weighted average cost of capital of 12%. Joe’s had been growing rapidly over the past several years, selling common stock in each year to finance its growth. However, due to difficult economic times this year, Joe’s decides to cut its dividend and increase its retained earnings so that the common equity portion of its capital structure will include only retained earnings and no new common stock will be sold. Joe’s weighted average cost of capital this year should beA. zero, since no new stock will be soldB. less than 12%C. equal to 12%D. greater than 12% B. less than 12%
CH 9KayCee Manufacturing Company paid a dividend yesterday of $3.50 per share. The dividend is expected to grow at a constant rate of 10% per year. The price of KayCee’s common stock today is $40 per share. If KayCee decides to issue new common stock, flotation costs will equal $4 per share. KayCee’s marginal tax rate is 35%. Based on the above information, the cost of new common stock is:A. 26.41%B. 20.09%C. 19.63%D. 17.55% B. 20.09%
CH 9A company has preferred stock that can be sold for $21 per share. The preferred stock pays an annual dividend of 3.5% based on a par value of $100. Flotation costs associated with the sale of preferred stock equal $1.25 per share. The company’s marginal tax rate is 35%. Therefore, the cost of preferred stock is:A. 18.87%B. 17.72%C. 14.26%D. 12.94% B. 17.72%
CH 9General Bill’s will issue preferred stock to finance a new artillery line. The firm’s existing preferred stock pays a dividend of $4 per share and is selling for $40 per share. Investment bankers have advised General Bill that flotation costs on the new preferred issue would be 5% of the selling price. The General’s marginal tax rate is 30%. What is the relevant cost of new preferred stock?A. 7%B. 7.37%C. 10%D. 10.53%E. 15% D. 10.53%
CH 9Five Rivers Casino is undergoing a major expansion. The expansion will be financed by issuing new 15-year, $1,000 par, 9% annual coupon bonds. The market price of the bonds is $1,070 each. Gamblers flotation expense on the bonds will be $50 per bond. Gamblers marginal tax rate is 35%. What is the pre-tax cost of debt for the newly-issued bonds?A. 8.76%B. 8.12%C. 7.49%D. 10.25% A. 8.76%
CH 9Kendall, Inc. has $15 million of outstanding bonds with a coupon rate of 10%. The yield to maturity on these bonds is 12.5%. If the firm’s tax rate is 30%, what is relevant cost of debt financing to Kendall, Inc.?A. 13.75%B. 8.75%C. 7%D. 3.75% B. 8.75%
CH 9Milton Parker has a capital structure that consists of $7 million of debt, $2 million of preferred stock, and $11 million of common equity, based upon current market values. Parker’s yield to maturity on its bonds is 7.4% and investors require a 8% return on Parker’s preferred and a 14% return on Parker’s common stock. If the tax rate is 35%, what is Parker’s WACC?A. 7.21%B. 8.12%C. 10.18%D. 12.25% C. 10.18%
CH 10A significant disadvantage of the payback period is that it:A. is complicated to explainB. increase firm riskC. does not properly consider the time value of moneyD. provides a measure of liquidity C. does not properly consider the time value of money
CH 10A significant disadvantage of the internal rate of return is that it:A. does not fully consider the time value of moneyB. does not give proper weight to all cash flowsC. may have an unrealistic reinvestment assumption with respect to the discount rate used for re-investment of the cash flowsD. It is expressed as a percentage C. may have an unrealistic reinvestment assumption with respect to the discount rate used for re-investment of the cash flows
CH 10Which of the following methods of evaluating investment projects can properly evaluate projects of unequal lives?A. the net present valueB. the paybackC. the internal rate of returnD. the equivalent annual annuity D. the equivalent annual annuity
CH 10Project A has an internal rate of return (IRR) of 15%. Project B has a IRR of 14%. Both projects have a required return of 12%. Which of the following statements is most correct?A. Both projects have a positive net present value (NPV)B. Project A must have a higher NPV than project BC. If the required return were less than 12%, Project B would have a higher IRR than Project AD. Project B has a higher profitability index than Project A A. Both projects have a positive net present value (NPV)
CH 10The net present value methodA. is consistent with the goal of shareholder wealth maximizationB. recognizes the time value of moneyC. uses all of a project’s cash flowsD. all of the above D. all of the above
CH 10What is the internal rate of return’s assumption about how cash flows are reinvested?A. they are reinvested at the firm’s discount rateB. they are reinvested at the required rate of returnC. they are reinvested at the project’s internal rate of returnD. they are only reinvested at the end of the project C. they are reinvested at the project’s internal rate of return
When reviewing the net present value profile for a projectA. the higher the discount rate, the higher the NPVB. the higher the discount rate, the higher the IRRC. the IRR will always be a point on the horizontal axis line where NPV = 0D. the IRR will always be a point on the horizontal axis equal to the required return C. the IRR will always be a point on the horizontal axis line where NPV = 0
CH 10Which of the following statements is most correct?A. if a project’s internal rate of return (IRR) exceeds the required return, then the project’s net present value (NPV) must be negativeB. if Project A has a higher IRR than Project B, then Project A must have a higher NPVC. the IRR calculation implicitly assumes that all cash flows are reinvested at a rate of return equal to the IRRD. a project with NPV = 0 is not acceptable C. the IRR calculation implicitly assumes that all cash flows are reinvested at a rate of return equal to the IRR
CH 10The net present value always provides the correct decision provided thatA. cash flows are constant over the asset’s lifeB. the required rate of return is greater than the internal rate of returnC. capital rationing is not imposedD. the internal rate of return is positive C. capital rationing is not imposed
CH 10We compute the profitability index of a capital budgeting proposal byA. multiplying the internal rate of return by the cost of capitalB. dividing the present value of the annual after tax cash flows by the cost of capitalC. dividing the present value of the annual after tax cash flows by the cash investment in the projectD. multiplying the cash inflow by the internal rate of return C. dividing the present value of the annual after tax cash flows by the cash investment in the project
CH 10The internal rate of return is:A. the discount rate that makes the NPV positiveB. the discount rate that equates the present value of the cash inflows with the present value of cash outflowsC. the discount rate that makes NPV negative and PI greater than oneD. the rate of return that makes the NPV positive B. the discount rate that equates the present value of the cash inflows with the present value of cash outflows
CH 10A project would be acceptable if:A. the pay back is greater than the discounted equivalent annual annuityB. the equivalent annual annuity is greater than or equal to the firm’s discount rateC. the profitability index is greater than the net present valueD. the net present value is positive D. the net present value is positive
CH 10Your firm is considering an investment that will cost $920,000 today. The investment will produce cash flows of $450,000 in year 1, $270,000 in years 2 through 4, and $200,000 in year 5. The discount rate that your firm uses for projects of this type is 11.25%. What is the investment’s net present value?A. $540,000B. $378,458C. $192,369D. $112,583 C. $192,369
CH 10Project XYZ requires an initial outlay of $400,000 and has a profitability index of 1.5. The project is expected to generate equal annual cash flows over the next twelve years. The required return for this project is 20%. What is project XYZ’s net present value?A. $600,000B. $200,000C. $120,000D. $80,000 B. $200,000
CH 10Your firm is considering an investment that will cost $920,000 today. The investment will produce cash flows of $450,000 in year 1, $270,000 in years 2 through 4, and $200,000 in year 5. The discount rate that your firm uses for projects of this type is 11.25%. What is the investment’s internal rate of returnA. 27.28%B. 21.26%C. 20.53%D. 15.98% C. 20.53%
CH 11Which of the following cash flows are not considered in the calculation of initial outlay for a capital investment proposal?A. increase in accounts recievableB. cost of issuing new bonds if the project is financed by a new bond issueC. installation costsD. none of these – all are considered B. cost of issuing new bonds if the project is financed by a new bond issue
CH 11Sunk costs are:A. recoverableB. incrementalC. not relevant in capital budgetingD. not deductible for tax purposes C. not relevant in capital budgeting
CH 11The pure play method:A. calculates beta using only project returnsB. uses the beta of a firm that is similar to the project being analyzed to determine the required rate of return for the projectC. selects a firm similar to the project being analyzed and uses its returns as the market return in estimating a project betaD. selects one of the firm’s existing projects that is similar to the project being analyzed and uses that project’s required rate of return B. uses the beta of a firm that is similar to the project being analyzed to determine the required rate of return for the project
CH 11A bakery company is considering one capital budgeting project involving the replacement of a sophisticated brick over, and another capital budgeting project involving research and development into synthetic food substitutes. Which of the following statement is most correct concerning the risk-adjusted discount rate(s) for the projects?A. the rate will likely be higher for the replacement project because the likelihood of success is higherB. the rate of return will likely be higher for the research and development project because of the uncertainty involved with research and development projectsC. the rate should be the same for both projects because they are being considered by one company with the same common shareholdersD. the rate should be higher for the replacement project because the company is more certain of the returns from a project similar to their existing business B. the rate of return will likely be higher for the research and development project because of the uncertainty involved with research and development projects
CH 11Incremental cash flows refer to:A. the difference between after-tax cash flows and before-tax accounting profitsB. the new cash flows that will be generated if a project is undertakenC. the cash flows of a project, minus financing costsD. the cash flows that are foregone if a firm does not undertake a project B. the new cash flows that will be generated if a project is undertaken
CH 11A company is expanding and has already signed a lease on new office space that costs $10,000 per month. The company also needs a new information system and hired a consultant to recommend new software. The consultant was paid $5,000 for her recommendation. Now the company is trying to make a choice between three competing software products. In the capital budgeting decision to purchase new software, the monthly rent for the office space is ________ and the consultant’s fee is ________.A. a sunk cost; a sunk costB. an opportunity cost; a sunk costC. incremental cash outflow; an opportunity costD. a sunk cost; a part of the initial outlay A. a sunk cost; a sunk cost
CH 11What method is used for calculation of the accounting beta?A. simulationB. regression analysisC. sensitivity analysisD. both simulation and sensitivity analysis B. regression analysis
CH 11Which of the following should be excluded in an analysis of a new project’s cash flows?A. additional investment in fixed assetsB. additional investment in accounts recievableC. additional investment in inventoryD. additional interest expenses on debt financing D. additional interest expenses on debt financing
CH 11Laural Inc. is a households products firm that is considering developing a new detergent. In evaluating whether to go ahead with the new detergent project, which of the following statements is most correct?A. the company will produce the detergent in a building that they already own. The cost of the building is therefore zero and should be excluded from the analysisB. the company will need to use some equipment that is could have leased to another company. This equipment lease could have generated $200,000 per year in after-tax income. The $200,000 should be excluded because the equipment can no longer be leasedC. the company will need to hire 10 new workers whose salaries and benefits will total $400,000 per year. Labor costs are not part of capital budgeting and should be excludedD. the company will produce the detergent in a building that it renovated 2 years ago for $300,000. The $300,000 should be excluded from the analysis D. the company will produce the detergent in a building that it renovated 2 years ago for $300,000. The $300,000 should be excluded from the analysis
CH 11The bankruptcy costs and/or shareholder under-diversification are an issue, what measure of risk is relevant when evaluating project risk in capital budgeting?A. total project riskB. contribution-to-firm riskC. systematic riskD. capital rationing risk B. contribution-to-firm risk
CH 11Taste Good Chocolates develops a new candy bar and plans to sell each bar for $1. Taste Good predicts that 1 million candy bars will be sold in the first year if the new candy bar is produced and sold, and includes $1 million of incremental revenues in its capital revenues of $700,000. What would explain this change?A. cannibalization of 300,000 of Taste Good Chocolates’ other candy barsB. excessive marketing costs to sell the 1 million candy barsC. a lower discount rateD. a higher selling price for the new candy bars A. cannibalization of 300,000 of Taste Good Chocolates’ other candy bars
CH 11Eastlick Dairy invests in a new kind of frozen desert called polar cream that becomes very popular. So many new customers come to the store that the sales of existing ice cream products are increased. The extra sales revenueA. should not be counted as incremental revenue for the polar cream project because the sales come from existing productsB. are synergistic effects that should be counted as incremental revenues for the polar cream projectC. are cannibalized sales that should be excluded from the analysisD. should be included in the analysis, but not the cost of the ice cream that is sold as that is a recurring expense B. are synergistic effects that should be counted as incremental revenues for the polar cream project
CH 11A local restaurant owner is considering expanding into another urban area. The expansion project will be financed through a line of credit with First National Bank. The administration costs of obtaining the line of credit are $500, and the interest payments are expected to be $1,000 per month. The new restaurant will occupy an existing building that can be rented for $2,500 per month. The incremental cash flows for the new restaurant include:A. $500 administrative costs, $1,000 per month interest payments, $2,500 per month rentB. $500 administrative costs, $2,500 per month rentC. $1,000 per month interest payment, $2,500 per month rentD. $2,500 per month rent D. $2,500 per month rent
CH 11Jones Company expects the following results in year one of a new project:Revenue………….$400,000Cash Expense…..150,000Depreciation………90,000EBIT……………………..160,000Taxes…………………….48,000Net Income……..$112,000The annual change in operating cash flow is equal toA. $298,000B. $202,000C. $160,000D. $250,000 B. $202,000
CH 11Project XYZ requires an investment in equipment of $600,000 to replace existing equipment. The existing equipment will produce after-tax salvage value of $70,000. Net working capital requirements are increased by $50,000. What is the total cash outflow at time zero?A. $720,000B. $650,000C. $530,000D. $580,000 D. $580,000600,000-70,000+50,000=580,000
CH 12When deciding upon how much debt financing to employ, most practitioners would cite which of the following as the most important influence on the level of the debt ratio?A. providing a borrowing reserveB. maintaining desired bond ratingC. ability to adequately meet financing chargesD. exploiting advantages of financial leverage C. ability to adequately meet financing charges
CH 12Business risk refers to:A. the risk associated with financing a firm with debtB. the variability of a firm’s expected earnings before interest and taxesC. the uncertainty associated with a firm’s CAPMD. the variability of a firm’s stock price B. the variability of a firm’s expected earnings before interest and taxes
CH 12All of the following will make the break-even point increase, other things equal, exceptA. fixed costs increaseB. the sales price per unit is decreased due to competitionC. variable costs increase due to higher direct labor costD. the number of units sold for the year decreased D. the number of units sold for the year decreased
Which of the following would not be a part of a firm’s capital structure?A. short-term notes payableB. long-term bondsC. preferred stockD. common stock A. short-term notes payable
CH 12According to the moderate view of capital costs and financing leverage, as the use of debt financing increases:A. the cost of capital continuously decreasesB. the cost of capital remains constantC. the cost of capital continuously increasesD. there is an optimal level of debt financing D. there is an optimal level of debt financing
CH 12The optimal capital structure is the funds mix that willA. minimize the use of debtB. achieve an equal proportion of debt, preferred stock, an common equityC. minimize the firm’s composite cost of capitalD. maximize total leverage C. minimize the firm’s composite cost of capital
CH 12The break-even point in sales dollars in convenient if:A. the firm sells a large amount of one productB. the firm deals with more than one productC. the price per unit is very lowD. depreciation expense is high B. the firm deals with more than one product
CH 12As production levels increaseA. variable costs per unit decreaseB. fixed costs per unit increaseC. fixed costs per unit stay the same and variable costs per unit increaseD. fixed costs per unit decrease and variable costs per unit stay the same D. fixed costs per unit decrease and variable costs per unit stay the same
Which of the following would be considered a fixed cost in a manufacturing setting?A. depreciationB. direct laborC. sales commissionD. direct materials A. depreciation
CH 12Operating leverage refers to:A. financing a portion of the firm’s assets with securities bearing a fixed rate of returnB. the additional chance of insolvency borne by the common shareholderC. the incurrence of fixed operating costs in the firm’s income statementD. a high degree of variable costs of production C. the incurrence of fixed operating costs in the firm’s income statement
CH 12A firm that uses large amounts of debt financing in an industry characterized by a high degree of business risk would have ________ earnings per share fluctuations resulting from changes in levels of salesA. noB. constantC. largeD. small C. large
CH 12All of the following are likely to result in the use of less debt in a company’s capital structure except:A. desire to maintain financial flexibilityB. desire to maintain a high credit ratingC. insufficient internal fundsD. a decrease in a company’s marginal tax rate C. insufficient internal funds
Ch 12Kocher Steel typically achieves one of three production levels in any given year: 8 million pounds of steel, 10 million pounds of steel, or 16 million pounds of steel. In tracking some of its costs, Kocher Steel’s controller discovered one cost that was $10 per pound no matter what the production level for the year. This is an example of a A. variable costB. fixed costC. semivariable costD. semifixed cost A. variable cost
Based on the data below, what is the break-even point in sales dollars?Average selling price per unit $18Variable cost per unit $13Units sold 400,000fixed costs $650,000interest expense $50,000A. $2,340,000B. $1,850,000C. $1,755,500D. $700,000 A. $2,340,000
CH 12Based on the data below, what is the break-even point in units produced and sold?Average selling price per unit $18Variable cost per unit $13Units sold 400,000Fixed costs $650,000Interest expense $50,000A. 130,000B. 140,000C. 150,000D. 180,000 A. 130,000

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