When Management Selects Production Technologies That Include a High Proportion

question 80

Multiple Choice

When management selects production technologies that include a high proportion of fixed costs,it:

• A) decreases the DOL.
• B) increases the DOL.
• C) decreases the NPV-breakeven level of sales.
• D) reduces the NPV of the cash flows.

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Definitions:

Tax Rate

The percentage at which an individual or corporation is taxed, which can vary according to income or profits.

Coupon

The interest rate paid by a bond, typically expressed as a percentage of the bond's face value.

Unlevered Cost

It involves the cost of funding a project or investment without any debt, reflecting the cost of capital that is equity financed.

Coupon

The yearly interest percentage paid on a bond, relative to its face value.