1. Which of the following would not be true about a project with a high operating leverage?
The project has mostly fixed costs
The project has mostly variable costs
Profits are highly sensitive to changes in sales
The project will fare poorly when demand is low
The project has equal amounts of variable and fixed costs.
2. Which of the following is true?
If a project's worst-case scenario gives a positive NPV, then you are guaranteed a profit
If the NPV of the base-case scenario is negative, then it is likely unnecessary to go for best- and worst-case scenario
The objective in setting the worst-case scenario is to identify the point where the NPV is zero
All of the answers are correct
None of the answers are correct