Which of the Following Are Guidelines for the Three Methods

question 27

Multiple Choice

Which of the following are guidelines for the three methods of capital budgeting with leverage?

• A)Use APV if project's level of debt is known over the life of the project.
• B)Use APV if project's level of debt is unknown over the life of the project.
• C)Use FTE or WACC if the firm's target debt-to-value ratio applies to the project over its life.
• D)Both A and C.
• E)Both B and C.

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Definitions:

Direct Labor Price Variance

The difference between the actual cost of direct labor and the expected (or standard) cost of direct labor used during production.

Direct Labor Payroll

The total amount of money paid to employees directly involved in manufacturing products or providing services.

Standard Rate of Pay

The regular amount of pay given for standard work hours or for performing a standard task or job.

Unfavorable Variance

The difference between actual costs and standard or budgeted costs when actual costs are higher, indicating lower profitability.