Everything Else Remaining the Same, an Increase in Fixed Costs

question 58

Multiple Choice

Everything else remaining the same, an increase in fixed costs:
I. increases the break-even point based on NPV
II. increases the accounting break-even point
III. decreases the break-even point based on NPV
IV. decreases the accounting break-even point

• A) I and III only
• B) III and IV only
• C) II and III only
• D) I and II only

---

Definitions:

Highly Leveraged

Describes a company or investment that has a high level of debt relative to equity, indicating a potentially higher risk and return profile.

Debt

An amount of money borrowed by one party from another, under the condition that it is to be paid back at a later date, usually with interest.

Financial Leverage

Financial leverage describes the use of borrowed funds to increase the potential return of an investment.

Liabilities

Financial obligations or debts owed by a company to creditors or suppliers, which must be settled over time.