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7) Scenario Analysis Automated Food Distribution Corp. (AFDC) produces vending
machines and places them in public buildings. The company has obtained permission to
place one of its machine in a local library. The company makes two types of machines.
One distributes soft drinks, and the other distributes snack foods. AFDC expects both
machines to provide benefits over a 8-year period, and each has a required investment of
$2,990. The firm uses a 9.8% cost of capital. Management has constructed the following
table of estimates of annual cash inflows for pessimistic., most likely, and optimistic
results.
8) Degree of operating leverage Grey Products has fixed operating costs of $382,000,
varaiable operating costs of $15.61 per unit, and selling price of $62.91 per unit.
9) Finding
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FIN 419 Final Exam Guide
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True/False (1point each)
1. The sole proprietor has unlimited liability; his or her total investment in the business,
but not his or her personal assets, can be taken to satisfy creditors.
2. Time-value of money is based on the belief that a dollar that will be received at some
future date is worth more than a dollar today.
3. Holders of equity have claims on both income and assets that are secondary to the
claims of creditors.