You Are the Manager of a Project That Has a Degree

question 30

Multiple Choice

You are the manager of a project that has a degree of operating leverage of 1.84 and a required return of 15 percent. Due to the current state of the economy, you expect unit sales to decrease by 3.5 percent next year. What change should you expect in the operating cash flows next year given your sales prediction?

• A) 6.44 percent decrease
• B) 4.50 percent decrease
• C) 5.34 percent decrease
• D) 6.44 percent increase
• E) 5.34 percent increase

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Definitions:

Foreign Investment

Investment in domestic companies and assets of another country by a foreign investor, aiming to gain returns.