1. Which of the following is false regarding leverage?
a. Leverage is a double-edged sword: when things go as planned, leverage is highly beneficial, but when things do not go as planned, leverage can be highly detrimental.
b. Leverage is a means of achieving more than normal results from a given course of action.
c. In terms of managerial finance, leverage involves the use of fixed assets or fixed interest payments.
d. None of these statements are false.
e. Leverage is highly risky and firms should avoid the use of leverage in most cases.
2. Company XYZ has computed their break-even point as 5,000 units. If the firm's fixed costs are $30,000 and variable cost per unit is $0.75, what is the price of each unit?
a. $4.00
b. $5.75
c. $2.50
d. $4.50
e. $6.75