A Project Has the Following Estimated Data: Price = $150

question 342

Multiple Choice

A project has the following estimated data: price = $150 per unit; variable costs = $88 per unit; fixed costs = $250,000; required return = 11%; initial investment = $200,000; $50,000 salvage value; life =
Ten years. What is the degree of operating leverage at the financial break-even level of output?

• A) 5.07
• B) 6.07
• C) 7.07
• D) 8.07
• E) 9.07

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Definitions:

Effortful Thinking

The cognitive processing that requires a deliberate, conscious effort to solve complex problems or to gain new insights.

Representativeness Heuristic

A cognitive shortcut that involves judging the probability of an event by its similarity to a prototype or example.

Availability Heuristic

A mental shortcut that relies on immediate examples that come to a given person's mind when evaluating a specific topic, concept, method, or decision.

Heuristic

A rule-of-thumb or shortcut that is used to make decisions or solve problems more quickly.