Revenue minus variable and fixed costs best describes: EBIT.EBITDA. NOPAT. EAT.
QUESTION 2 Compared to an identical project with a lowerproportion of fixed costs, a project with a higher proportion offixed costs will have: a higher degree of sensitivity of EBITDA toa change in revenues. a lower degree of sensitivity of EBITDA to achange in revenues. no discernible difference of a change insensitivity of EBITDA to a change in revenues. a stable net incomestream as a function of revenues.
QUESTION 3 Depreciation and amortization are treated like fixedcosts: in the calculation of the degree of pretax cash flowoperating leverage. in the calculation of the degree of accountingoperating leverage. for cash flow purposes. for computing dividend.2
QUESTION 4 If the degree of accounting operating leverage is 1.3for 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 cashflows.
QUESTION 5 Which is the term used to define how many units mustbe sold for pre-tax operating cash flow to be equal to zero?Pre-tax accounting operating profit break-even point Pre-taxoperating financial leverage break-even point Pre-tax accountingsensitivity break-even point Pre-tax operating cash flow break-evenpoint 2 points QUESTION 6 The difference between revenue andvariable cost is called: total contribution. net profit. EBIT.EAT.
QUESTION 7 Which of the following statements is true of theeconomic break-even point? It is the number of units that must besold for accounting operating profit to equal $0. It is the levelof unit sales at which cash flows or profitability for one projectalternative switches from being lower than that of anotheralternative to being higher. It is the number of units that must besold each year during the life of a project so that the NPV of aproject equals $0. It is the number of units that must be sold forpretax operating cash flow to be $0.
QUESTION 8 Astroscope Tours finds that if it were to increaseits price by 10 percent, it would have a 6 percent reduction in theNPV of its new 3-Hour Tour. Considering other things to beunchanged, Astroscope's analysis could be described as: Monte Carlosimulation. break-even analysis. sensitivity analysis. varianceanalysis.
QUESTION 9 If a firm were interested in knowing the effect of asingle input change on the net present value of a project, then thefirm would most likely want to perform: a Monte Carlo simulation. ascenario analysis. a sensitivity analysis. a break-evenanalysis.
QUESTION 10 Scenario analysis can help a firm to: understand thedegree of uncertainty that a different set of project-affectingcircumstances may hold. eliminate all of the uncertainty that adifferent set of project-affecting circumstances may hold.transform a risky project into a risk-free project. understand thedegree of certainty that a similar set of project-affectingcircumstances may hold.
