Use the Information for the Question(s)below

question 53

Multiple Choice

Use the information for the question(s) below.
Omicron Industries' Market Value Balance Sheet ($ Millions)
and Cost of Capital Omicron Industries' New Project Free Cash Flows (Millions) Assume that this new project is of average risk for Omicron and that the firm wants to hold constant its debt to equity ratio.
-The debt capacity for Omicron's new project in year 0 is closest to:

• A)$38.75 million.
• B)$75.50 million.
• C)$50.00 million.
• D)$10.25 million.

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Definitions:

Sales Variance

Sales variance is the difference between actual sales and budgeted or planned sales, used to assess performance.

Variable Costs

Costs that vary directly with the level of production or business activity.

Fixed Costs

Fixed costs are business expenses that remain constant regardless of the level of production or sales, such as rent, salaries, or insurance premiums.

Sales Volumes

The quantity or number of products sold or services rendered in a particular period of time.