Mingming Is Planning to Purchase a New Car and Plans

question 84

Multiple Choice

Mingming is planning to purchase a new car and plans to borrow $15,000 to help finance the purchase.She has $50,000 of equity in her home so she is planning to take out a home equity loan.Mingming is in the 25% tax bracket.The bank is requiring an 8% interest rate on this loan.The car dealership has just announced a promotion lowering its interest rate on auto loans.In order for the auto dealership loan to be more attractive,the interest rate must be lower than

• A)8%.
• B)6%.
• C)4%.
• D)10%.

Understand the effect of leverage on a firm's break-even point and operational fragility.

Analyze the interplay between cost structure, capital structure, and their effects on financial and operating leverage.

Understand the concepts of financial and operating leverage and their impacts on a firm's capital structure and cost structure.

Recognize the relationship between operating leverage and fixed and variable costs.

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Definitions:

Scientific Method

A systematic and logical approach to discovering how things in the universe work, involving making observations, forming a hypothesis, conducting experiments, and making conclusions.

Developing

A descriptor for countries or regions undergoing economic, industrial, and social progress, often with rapid growth and improvement in living standards.

Hypothesis

A proposed explanation made on the basis of limited evidence as a starting point for further investigation.

Human Development

The multidisciplinary study of how people change and how they remain the same over time.