FINC600

finc600-4.xlsx

Instructions

NAME:
	To complete the homework assignments in the templates provided:
	1.	The question is provided for each problem. You may need to refer to your textbook for additional information in a few cases.
	2.	You will enter the required information into the shaded cells.
	3.	The cells are coded:
		a.	T requires a text answer.
		b.	C requires a calculation. You cannot perform the operation on a calculator and then type the answer in the cell. You will enter the calculation in the cell, using Excel format/formula/function and only the final answer will show in the cell. I will be able to review your calculation and correct, if necessary.
		c.	F requires a number only. In some problems, a “Step 1” is added to help you solve the problem.
	4.	Name your assignment file as "lastnamefirstinitial-FINC600-Week#", and submit by midnight ET, Day 7.

&16Instructions

Principles of Corporate Finance, Concise, 2nd Edition

Problem 10-14
Suppose that the expected variable costs of Otobai’s project are ¥33 billion a year and that fixed costs are zero. How does this change the degree of operating leverage (DOL)? Now recompute the operating leverage assuming that the entire ¥33 billion of costs are fixed.
Answers:	See page 243, Table 10.1, of textbook for additional information. Copy is also provided below.
	DOL Formula	Project Costs	Calculation
Variable cost	1+(Fixed cost + depreciation)/ operating profit	F	C
Fixed cost	1+(Fixed cost + depreciation)/ operating profit	F	C

Instructions: Please refer to your book for assistance with your homework. Post your work in the worksheet. Highlight your final answer.

Principles of Corporate Finance, Concise, 2nd Edition