All Else Equal, an Increase in Fixed Costs

question 74

Multiple Choice

All else equal, an increase in fixed costs

• A)increases the break-even point based on NPV and decreases the accounting break-even point.
• B)decreases the break-even point based on NPV and decreases the accounting break-even point.
• C)increases the accounting break-even point and decreases the break-even point based on NPV.
• D)increases the break-even point based on NPV and increases the accounting break-even point.

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Definitions:

Market Price

The immediate valuation at which one can transact assets or services in the market sector.

Coupon Rate

The yearly rate of interest that a bond issuer pays to the bondholders, shown as a percentage of the bond's nominal value.

Maturity

The finite time at which a financial instrument, such as a bond or loan, reaches its expiration date and the principal is to be paid back.

Cost of Equity

The expected return on investment required by shareholders, representing the compensation for investing in a company's equity and assuming the associated risk.