The fiXed Costs of a Project Are $16,000

question 140

Multiple Choice

The fixed costs of a project are $16,000. The depreciation expense is $7,800 and the operating cash flow is $12,700. What is the degree of operating leverage for this project?

• A) 1.26
• B) 1.43
• C) 1.79
• D) 2.26
• E) 2.79

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Definitions:

Appreciation

An increase in the value of an asset over time, often due to changes in market demand or supply, inflation, or other economic factors.

Market Yield

The interest rate that investors demand for buying securities currently available in the market.

Semiannually

Pertains to an event or action occurring twice a year, typically every six months.

Maturity

The period of time or deadline after which an obligation, such as a bond or loan, must be repaid in full.