FIN 480 EXAM 1 QUIZ QUESTIONS AND ANSWERS
You are considering a new project with depreciation of $962, fixed costs of 5,000, and a
sales price of $13.49. The variable cost per unit is $6.26. Ignore taxes. What is the
accounting break-even level of production?
825 units
1,248 units
559 units
511 units
1,330 units - Answers - 825
Accounting break-even point = ($5,000 + $962)/($13.49 − $6.26) = 825 units
Mosler Company is considering a project requiring an initial investment of $229,700,
fixed costs of $71,900, variable costs of $5.07 per unit, a selling price of $13.07 per unit,
and a life of four years. The discount rate is 14 percent, and the tax rate is 30 percent.
Depreciation is straight-line to zero over the project's life. What is the accounting break-
even point?
15,008 units
13,200 units
16,166 units
11,302 units
17,352 units - Answers - 15,008
Accounting break-even point = [$71,900 + $229,700/4](1 − .30)/[($13.07 − $5.07)(1 −
.30)] = 16,166 units
Y3K, Inc., has sales of $6,199, total assets of $2,815, and a debt-equity ratio of 1.2. If
its return on equity is 12 percent, what is its net income? - Answers - $153.55
Martin's Lumber has a profit margin of 7 percent and a dividend payout ratio of 30
percent. The total asset turnover is .90, and the debt-equity ratio is .45. What is the
sustainable rate of growth?
6.33%
6.83%
6.67%
6.90%
6.99% - Answers - 6.83%
Return on equity = .07 × .90 × (1 + .45) = .09135
Sustainable growth = [.09135 × (1 − .30)]/[1 − .09135 × (1 − .30)] = .0683, or 6.83%
You are considering a new project with depreciation of $962, fixed costs of 5,000, and a
sales price of $13.49. The variable cost per unit is $6.26. Ignore taxes. What is the
accounting break-even level of production?
825 units
1,248 units
559 units
511 units
1,330 units - Answers - 825
Accounting break-even point = ($5,000 + $962)/($13.49 − $6.26) = 825 units
Mosler Company is considering a project requiring an initial investment of $229,700,
fixed costs of $71,900, variable costs of $5.07 per unit, a selling price of $13.07 per unit,
and a life of four years. The discount rate is 14 percent, and the tax rate is 30 percent.
Depreciation is straight-line to zero over the project's life. What is the accounting break-
even point?
15,008 units
13,200 units
16,166 units
11,302 units
17,352 units - Answers - 15,008
Accounting break-even point = [$71,900 + $229,700/4](1 − .30)/[($13.07 − $5.07)(1 −
.30)] = 16,166 units
Y3K, Inc., has sales of $6,199, total assets of $2,815, and a debt-equity ratio of 1.2. If
its return on equity is 12 percent, what is its net income? - Answers - $153.55
Martin's Lumber has a profit margin of 7 percent and a dividend payout ratio of 30
percent. The total asset turnover is .90, and the debt-equity ratio is .45. What is the
sustainable rate of growth?
6.33%
6.83%
6.67%
6.90%
6.99% - Answers - 6.83%
Return on equity = .07 × .90 × (1 + .45) = .09135
Sustainable growth = [.09135 × (1 − .30)]/[1 − .09135 × (1 − .30)] = .0683, or 6.83%
