6. The difference between sales price per unit and variable cost per unit is a.

Question

6. The difference between sales price per unit and variable cost per unit is a. net margin b. contribution marginelups lo beta snionunl sod c. sales margin d. operating leverage per unit 7. The Payback method of capital budgeting is popluar because it is easy to understand. It is not very effective, however, because it ignores and a. assets; liabilities -E cost of capital; dividends c- competition; market conditions d. time-value-of-money; future cash flows 8. Interest earned on both the initial principal and the interest reinvested from prio periods is called interest. a. simple b. coupon c. compound d. annual 9. The minimum discount rate for capital budgeting purposes is the firm's own a. effective annual rate b. cost of capital c. lending rate d. dividend rate zgnin 103 bani419? eunion ICT tinn 10. The AccoUn

Explanation / Answer

6) The correct choice is b. Contribution margin

Explanation : - Contribution margin = Sales – Variable costs

7) The correct choice is d. time value of money, future cash flows

Explanation : - The payback period evaluation ignores the time value of money, the uncertainty of future cash flows, and the contribution of a project to the value of the firm.

8) The correct choice is c. Compound

Explanation : - Compound interest is created when interest that is added to the principal of a deposit or loan also earns interest.

9) The correct choice is b. cost of capital

Explanation : - Cost of capital is the minimum required rate of return which a firm requires as a condition for undertaking an investment.

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