What is the relationship between operating leverage and


1. Compute the IRR, NPV, payback period, discounted payback period for the following two mutually exclusive projects. Assume the required return is 10%.

Year Project A Project B

0 -40 -20

1 70 15

2 10 40

2. What is the relationship between operating leverage and volatility in EBIT? What is the relationship between financial leverage and volatility in EAT?

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Financial Management: What is the relationship between operating leverage and
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