SDSU BA 323 FINANCE FINAL EXAM NEWEST ACTUAL EXAM COMPLETE QUESTIONS AND CORRECT DETAILED ANSWERS (VERIFIED ANSWERS) | ALEADY GRADED A+

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SDSU BA 323 FINANCE FINAL EXAM NEWEST 2026-

2027 ACTUAL EXAM COMPLETE QUESTIONS AND

CORRECT DETAILED ANSWERS (VERIFIED

ANSWERS) | ALEADY GRADED A+

What is operating leverage? - ANSWER-Operating

leverage is the use of fixed costs instead of variable costs




If a company mainly has high fixed costs, does it have

high or low operating leverage? - ANSWER-High fixed

costs: high operating leverage.




Does operating leverage create more or less business

risk? - ANSWER-Creates more business risk

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What is the pro and con of using operating leverage to

increase risk? - ANSWER-Higher returns, more risk




What is internal rate of return? - ANSWER-The discount

rate that forces the present value of the cash inflows to

equal the price of the bond (or forcing the NPV to equal

zero)




What are the decision rules for using IRR and when to

accept or reject a project. - ANSWER-If IRR > WACC,

accept




If projects are independent, accept both projects if IRR >

WACC

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If mutually exclusive, accept project with the highest IRR




What are the different reinvestment rate assumptions for

the NPV method vs. the IRR method? - ANSWER-NPV

assumes CFs are reinvested at the WACC.




IRR assumes CFs are reinvested at IRR




Which of the methods (NPV or IRR) is the best and why. -

ANSWER-NPV is better because reinvesting at the

opportunity cost of capital is more realistic.