The Capitalization Rate When Figuring Goodwill Should Be a Figure

question 108

Multiple Choice

The capitalization rate when figuring goodwill should be a figure assigned to show

• A) Risk and expected growth rate of future earnings
• B) Risk and profit minus taxes
• C) Expected growth rate and profit
• D) Expected growth rate and the value of tangible assets

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Definitions:

Average Total Cost

The sum of average fixed costs and average variable costs, divided by the total quantity of output, reflecting the per-unit cost of production including all expenses.

Marginal Cost

The hike in aggregate cost linked with the fabrication of one extra unit of a product or service.

Marginal Revenue

The additional income received from selling one more unit of a good or service, critical in determining optimal production levels.

Average Variable Cost

The total variable cost divided by the quantity of output produced, indicating the variable cost of producing each unit.