Which of the Following Statements About Discount Rates Is False

question 57

Multiple Choice

Which of the following statements about discount rates is false?

• A) A discount rate for computing NPV cannot change from one period to the next.
• B) The discount rate for a risky investment should be higher than the discount rate for a risk-free investment.
• C) Discount rates can be applied either to the cash flow from a transaction or the taxable income from a transaction.
• D) Both a discount rate for computing NPV cannot change from one period to the next and discount rates can be applied either to the cash flow from a transaction or the taxable income from a transaction.

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Definitions:

Average Variable Cost

The total variable cost divided by the number of units produced, representing the variable cost per unit of output.

Average Fixed Cost

The fixed costs (costs that do not change with the level of output) of producing a good or service, divided by the quantity of output produced.

Total Cost

The entire cost of production, including both fixed and variable costs.

Average Total Cost

Average total cost is the total cost of production (fixed plus variable costs) divided by the total quantity produced, indicative of the cost per unit at different levels of output.