The Following Data Have Been Computed for a Firm: When

question 46

Multiple Choice

The following data have been computed for a firm: when sales are $20,000,EBIT is $5,000 and operating leverage is 2.5.Suppose sales increase to $23,000; what is the new level of EBIT?

• A) $1,875
• B) $6,875
• C) $3,000
• D) $8,435

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Definitions:

Shareholder Wealth

The value that shareholders gain from their investment in a company, measured by stock prices and dividends.

Project Risk

The uncertainty associated with achieving project objectives within defined constraints such as scope, time, and budget.

Standard Deviation

Standard deviation is a statistical measure that quantifies the amount of variation or dispersion of a set of data values from the mean, often used to assess investment risks.

Beta

An indicator of the level of fluctuation, or inherent risk, associated with a specific security or portfolio in relation to the overall market.