Which of the Following Statements Is Most Correct

question 20

Multiple Choice

Which of the following statements is most correct?

• A) Variable costs are expenses that do not change if sales revenues rise.
• B) A firm can reduce project risk by increasing the sensitivity of EBITDA to revenue changes.
• C) A project that has a higher proportion of fixed costs will have cash flows that are more sensitive to changes in revenues than an otherwise identical project with a lower proportion of fixed costs.
• D) An investment in new manufacturing equipment that will automate a production process would be an example of a variable cost.

---

Definitions:

Corporate Tax Rate

The corporate tax rate is the percentage of a corporation's taxable income that it must pay to the government, which varies by country and sometimes within regions of countries.

Bottom-Up Approach

A strategy that starts at the operational or project level and works up to the top levels of management for decision-making.

Operating Cash Flow

Operating Cash Flow is a financial indicator showing the cash generated from the normal operating activities of a company in a specific period.

Depreciation Expense

The methodical distribution of an asset's depreciation value throughout its lifespan.