Which One of the Following Could Lower the Risk of a Project

question 92

Multiple Choice

Which one of the following could lower the risk of a project by lowering the degree of operating leverage?

• A) You could hire temporary workers from an employment agency rather than hiring part-time employees.
• B) You could use sub-contractors to produce sub-assemblies of your product rather than purchasing new equipment to do the work in-house.
• C) You could lease equipment on a long-term basis rather than buying the equipment.
• D) You could lower the projected selling price per unit.
• E) You could change the production method to one which relies more on fixed costs and less on variable costs than the current proposed method of production.

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Definitions:

Straight-Line Method

A method of calculating depreciation or amortization by evenly spreading the cost of an asset over its useful life.

Net Equipment Capital Cost

The total cost of acquiring equipment for business operations, minus any salvage value or depreciation.

Increased Working Capital

Refers to an uptick in the company's current assets minus its current liabilities, indicating improved short-term financial health.

Tax Rate

The percentage at which an individual or corporation is taxed, which can vary depending on income or profit levels.