A Firm Is Reviewing a Project That Has Fixed Costs

question 167

Multiple Choice

A firm is reviewing a project that has fixed costs of $123,500, variable costs of $189,700, sales of $427,600, and a 34% marginal tax rate. The project has no initial cash requirements. What is the degree of operating leverage for this project?

• A) .61
• B) 1.22
• C) 1.61
• D) 1.64
• E) 2.64

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Definitions:

Phenylketonuria (PKU)

A genetic disorder resulting in a deficiency in the enzyme needed to process the amino acid phenylalanine, leading to harmful levels in the body.

Genotype

The genetic constitution of an individual organism, often contrasted with phenotype, which is the expression of genes in observable characteristics.

Phenotype

A phenotype is the set of observable characteristics of an individual resulting from the interaction of its genotype with the environment.

Environmental Differences

Variations in the surroundings or conditions that can affect the development, behavior, or survival of organisms.