An Opportunity Flow Diagram Is a Time-Sequenced Chart Showing Plotted

question 57

True/False

An opportunity flow diagram is a time-sequenced chart showing plotted values measuring the flow of end product or components.

Know the concept of target capital structure and its relevance to the WACC.

Learn how the marginal cost of capital (MCC) and investment opportunity schedule (IOS) guide capital budgeting decisions.

Understand the components of a firm's capital, and their relative costs.

Calculate the after-tax cost of debt and understand its influence on the weighted average cost of capital (WACC).

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Definitions:

Contribution Margin

The difference between sales revenue and the variable costs associated with the production or sale of products or services. It's used to determine the ability of a business to cover its fixed costs.

Margin of Safety

This financial ratio measures the difference between actual or expected sales and the break-even point, indicating the cushion a company has before it incurs a loss.

Relevant Range

The range of activity within which the assumptions about fixed and variable cost behavior are valid.

High-low Method

A way to estimate the cost-behavior formula that uses the highest and lowest levels of activity to determine fixed and variable costs.