Centex, a Producer of Telephone Systems for Small Businesses, Has

question 45

Multiple Choice

Centex, a producer of telephone systems for small businesses, has current sales of$43 million and variable operating costs of$27.95 million.Centex expects to increase sales in the coming year by 15% while keeping fixed operating costs constant at $9.1 million.What is the DOL for Centex?

• A)3.3
• B)7.2
• C)1.0
• D)2.5

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Definitions:

Discounting

The process of determining the present value of a future amount of money or stream of cash flows given a specific rate.

Present Dollar

Present Dollar refers to the value of a sum of money in terms of its purchasing power at the current period, not adjusted for inflation or deflation over time.

Equal Payments

Regularly scheduled payments of the same amount over the term of a loan or lease, combining principal and interest components.

Compounded Annually

The process of adding interest to the principal sum of a loan or deposit once every year, resulting in exponential growth.