SOLUTION MANUAL for Principles Of Corporate Finance 19th Edition By Richard Brealey, Stewart Myers, ALL Chapters 1- 34

Parrino,b2e,bTestbBank.bChapterb12


31. EBITDAbstandsbfor
A) earningsbbeforebinterest,btaxes,bandbamortizedbdepreciation.
B) earningsbbeforebinterest,btaxes,bdepreciation,bandbamortization.
C) earningsbbeforebinterestbandbtaxes.
D) nonebofbthebabove.
Ans: B


Format:bbMultiplebChoice
LearningbObjective:bbLOb1
LevelbofbDifficulty:bbEasy
32. Revenuebminusbvariablebandbfixedbcostsbbestbdescribes
A) EBIT.
B) EBITDA.
C) NOPAT.
D) nonebofbthebabove.
Ans: B


Format:bbMultiplebChoice
LearningbObjective:bbLOb1
LevelbofbDifficulty:bbEasy
33. AnotherbnamebforbEBITDAbis
A) pretaxboperatingbcashbflow.
B) operatingbcashbflow.
C) netbincomebbeforebtax.
D) netbincome.
Ans: A


Format:bbMultiplebChoice
LearningbObjective:bbLOb1
LevelbofbDifficulty:bbEasy
34. Abfirmbwithbabhigherbproportionbofbfixedbcostsbwillbcreate
A) abhigherbdegreebofbsensitivitybofbEBITDAbtobabchangebinbrevenues.
B) ablowerbdegreebofbsensitivitybofbEBITDAbtobabchangebinbrevenues.
C) nobdiscerniblebdifferencebofbabchangebinbsensitivitybofbEBITDAbtobabchangebinbreve
nues.
D) abfirmbwithbabmuchbmorebstablebnetbincomebstreambasbabfunctionbofbrevenues.
Ans: A




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, Format:bbMultiplebChoice
LearningbObjective:bbLOb1
LevelbofbDifficulty:bbEasy
35. Ifbabfirmbisbaboutbtoboperatebinbanbenvironmentbinbwhichbtherebwillbbebabgreatbdealbofbvaria
bilitybinbtheblevelbofbrevenues,bthenbthebfirm
A) shouldbstructurebitsbcostbstructurebtobhavebhighbfixedbcostsbandbhigherbtotalbvariableb
costs.
B) shouldbstructurebitsbcostbstructurebtobhavebhighbfixedbcostsbandbconsequentlyblowerb
perbunitbvariablebcosts.
C) shouldbstructurebitsbcostbstructurebtobhaveblowbfixedbcostsbandbconsequentlybhigherb
perbunitbvariablebcosts.
D) Nonebofbthebabove.
Ans: C


Format:bbMultiplebChoice
LearningbObjective:bbLOb2
LevelbofbDifficulty:bbEasy
36. Thebdegreebofbpretaxbcashbflowboperatingbleveragebprovidesbusbwith
A) abmeasurebofbhowbsensitivebpretaxboperatingbcashbflowsbarebtobchangesbinbrevenue.
B) abmeasurebofbhowbsensitivebaccountingboperatingbprofitsbarebtobchangesbinbrevenue.
C) abmeasurebofbhowbsensitivebNOPATbisbtobchangesbinbrevenue.
D) nonebofbthebabove.
Ans: A


Format:bbMultiplebChoice
LearningbObjective:bbLOb2
LevelbofbDifficulty:bbEasy
37. ___________bisbabmeasurebofbthebsensitivitybofbEBITDAborbEBITbtobchangesbinbrevenue.
A) Totalbleverage
B) Financialbleverage
C) Operatingbleverage
D) Nonebofbthebabove
Ans: C




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, Format:bbMultiplebChoice
LearningbObjective:bbLOb2
LevelbofbDifficulty:bbEasy
38. Depreciationbandbamortizationbarebtreatedblikebfixedbcosts
A) inbthebcalculationbofbthebdegreebofbpretaxbcashbflowboperatingbleverage.
B) inbthebcalculationbofbthebdegreebofbaccountingboperatingbleverage.
C) forbcashbflowbpurposes.
D) nonebofbthebabove.
Ans: A


Format:bbMultiplebChoice
LearningbObjective:bbLOb2
LevelbofbDifficulty:bbEasy
39. Ifbthebdegreebofbaccountingbleveragebisb1.3bforbabfirm,bthenbab10bpercentbincreasebinbrevenu
ebshouldbdriveba
A) 13%bincreasebinbpretaxboperatingbcashbflows.
B) 13%bincreasebinbEBIT.
C) 30%bincreasebinbEBIT.
D) nonebofbthebabove.
Ans: B


Format:bbMultiplebChoice
LearningbObjective:bbLOb4
LevelbofbDifficulty:bbEasy
40. Gilligan'sbBoatbToursbfindsbthatbifbitbwerebtobincreasebitsbpricebbyb10bpercent,bitbwouldbhav
ebab6bpercentbreductionbinbthebNPVbofbitsbnewb3-HourbTour.bGilligan'sbanalysisbcouldbbebd
escribedbas
A) abMontebCarlobsimulation.
B) scenariobanalysis.
C) sensitivitybanalysis.
D) nonebofbthebabove.
Ans: B




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