If a Company Has a Degree of Operating Leverage of 5

question 136

Multiple Choice

If a company has a degree of operating leverage of 5 and sales increase by 30%, then ________.

• A) total fixed costs will increase by 150%
• B) total costs will increase by 150%
• C) profit will increase by 120%
• D) profit will increase by 150%

Comprehend that shorter payback periods do not necessarily indicate higher profitability.

Grasp the significance of aligning the discount rate with the company's minimum required rate of return in net present value analysis.

Recognize the importance of considering salvage values in the computation of payback periods.

Understand the preference rule for ranking projects using the profitability index.

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Definitions:

Male Pipefishes

Members of the Syngnathidae family, unique for their role in childbearing, as males carry and nourish embryos in a specialized pouch.

Optimal Investment

The most efficient allocation of resources or capital to achieve the highest possible return or benefit, considering the level of risk involved.

Probability Of Remating

The likelihood that an individual will engage in mating again after a certain period or event, which can affect genetic diversity and population dynamics.

Sex Ratios

The proportion of males to females in a population, which can influence social structure, mate competition, and reproductive strategies.