The Ladder Company Wants to Develop a Cost Estimating Equation

question 105

Multiple Choice

The Ladder Company wants to develop a cost estimating equation for its monthly cost of electricity. It has the following data: $\begin{array}{crr}\text { Month } & \text { Cost of Electricity } & \text { Direct Labor Hours }\\\hline\text { February } & \$ 8,100 & 750 \\\text { May } & 9,000 & 850 \\\text { August } & 10,200 & 1,000 \\\text { November } & 8,700 & 800\end{array}$ Using the high-low method, which of the following is the best equation?

• A)Y = $900 + $12.00X
• B)Y = $900 + $8.40X
• C)Y = $1,800 + $8.40X
• D)Y = $2,400 + $8.40X

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Definitions:

MIRR

MIRR (Modified Internal Rate of Return) adjusts the standard IRR calculation to account for differences in reinvestment rates and project financing costs.

Mutually Exclusive

Refers to events or choices that cannot occur or be selected at the same time.

WACC

Weighted Average Cost of Capital is a calculation of a firm's cost of capital in which each category of capital is proportionately weighted.

Payback Method

Payback Method is a capital budgeting technique that calculates the time required for an investment to generate cash flows sufficient to recover the initial investment cost.