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JulsSmile [24]
3 years ago
11

A company has a degree of operating leverage of 2.5. If sales increase by 10%, then profits will: Multiple choice question. incr

ease by 25% increase by 10% decrease by 10% decrease by 25%
Business
1 answer:
RSB [31]3 years ago
4 0

Answer:

. increase by 25% increase

Explanation:

The degree of operating leverage (DOL) measures the sensitivity of a company's operating income or profits to changes in the demand

DOL = percentage change in operating income or profits / percentage change in units sold

2.5 = percentage change in operating income / 10%

percentage change in operating income  = 10% x 2.5 = 25%

profits will increase by 25%

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CCC Corp has a beta of 1.5 and is currently in equilibrium. The required rate of return on the stock is 12.00% versus a required
Oxana [17]

Answer:

CCC's new required return be 16.5%

Explanation:

For computing the new required return, first, we have to compute the risk-free rate of return which is shown below:

Expected return = Risk- free rate of return + Beta × (Market risk -  Risk- free rate of return)

12% = Risk- free rate of return  + 1.5 × (10%  -  Risk- free rate of return))

12% = Risk- free rate of  return  + 15% - 1.5% Risk- free rate of return

So, the Risk- free rate of  return is 6%

Now the average stock is increased by 30%

So, the new market risk is 13% and other things will remain constant

So, the new required return equal to

= 6% + 1.5 × (13% - 6%)

= 6% + 1.5 × 7

= 16.5%

8 0
3 years ago
Which best describes what financial planning skills ultimately enable an individual to do
Liula [17]

Answer:

Prepare for the future

Explanation:

Personal financial planning is the term used to describe the way an individual or a family manage their finances to meet their short-term and long-term goals. It involves developing personal financial goals and making plans on how to achieve them.

In developing and making plans, an individual considers the current and expected future income, present and expected expenditures such as medical health insurance expenses and school fees. An individual may opt to engage the services of a personal finance manager who advances on the savings and investments required to achieve the intended goals. Financial Planning Planning assists one prepare for the future.

4 0
3 years ago
Read 2 more answers
Bradshaw Inc. is contemplating a capital investment of $88,000. The cash flows over the project’s four years are: Year Expected
Yuri [45]

Answer:  3.50 years

Explanation:

The Payback period is a method of checking the viability of a project. It measures how long it will take a project to pay back it's initial investment.

Formula is;

= Year before payback + Cash remaining till payback/ Cash inflow in year of payback

Year 1 Net Cash Inflow

= Cash Inflow - Cash Outflow

= 30,000 - 12,000

= $18,000

Year 2

= 45,000 - 20,000

= $25,000

Year 3

= 60,000 - 25,000

= $35,000

Year 4

= 50,000 - 30,000

= $20,000

Year 1 + 2 + 3

= 18,000 + 25,000 + 35,000

= $78,000

Amount remaining till payback

= Investment - Cash inflow so far

= 88,000 - 78,000

= $10,000

= Year before payback + Cash remaining till payback/ Cash inflow in year of payback

= 3 + 10,000/20,000

= 3.50 years

8 0
3 years ago
An aggregate production function shows​ ________. A. the relationship between a​ country's output and its price level B. various
Maru [420]

Answer:

The correct answer is letter "C": the relationship between a​ country's GDP and its factors of production.

Explanation:

The Aggregate Production Function describes the relationship between a country's Gross Domestic Product (GDP) and the factors of production involved in it. Aggregate Production functions are considered physical and human capital, labor, knowledge, social infrastructure, and natural resources. Production increases as a result of increases in capital, natural resources, and labor.

3 0
3 years ago
Which one of the following statements regarding partnership taxation is incorrect?
Arisa [49]

Answer:

A partnership is a taxable entity for Federal income tax purposes.

5 0
2 years ago
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