Which of the following is a key determinant of operating leverage？
A. Level and cost of debt.
B. The competitive nature of the business.
C. The trade-off between fixed and variable costs.
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Which of the following statements about the payback period method is least accurate？ The payback period:
A. Provides a rough measure of a projects liquidity.
B. Considers all cash flows throughout the entire life of a project.
C. Is the number of years it takes to recover the original cost of the investment.
A share repurchase that begins with a company communicating to shareholders a specific number of shares and a range of acceptable prices is most likely to be a（n）:
A. Open market repurchase.
B. Fixed price tender offer.
C. Dutch auction.
A companys operations analyst is evaluating a plant expansion project that is likely to be financed in part by issuing new common equity. Flotation costs are expected to be 4% of the amount of new equ
A. Ignore them,because flotation costs for common equity are likely to be nonmaterial.
B. Estimate the cost of equity capital based on a share price 4% less than the current price.
C. Determine the flotation cost attributable to this project and treat it as part of the projects initial cash outflow.
A company is considering either an open market share repurchase or a cash dividend of an equal amount. Compared to the open market share repurchase, the cash dividend is most likely to:
A. Increase a shareholders wealth by a greater amount.
B. Increase a shareholders wealth by a lesser amount.
C. Have a relative impact that depends on the tax treatment of the two alternatives.
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