If a Company Has Net Sales of $800,000 and Cost

question 220

Multiple Choice

If a company has net sales of $800,000 and cost of goods sold of $480,000, the gross profit rate is

• A) 60%.
• B) 40%.
• C) 20%.
• D) 100%.

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Definitions:

Discount Rate

A rate of interest utilized within discounted cash flow evaluations to ascertain the present worth of forthcoming cash flows.

Decision Tree

A timeline representation used in planning projects subject to multiple outcomes. Wherever an event has several outcomes, the timeline branches into as many paths, each with a probability. The result is a proliferation of possible paths to completion, each representing an outcome, its financial implication, and its probability. Hence, the decision tree specifies a probability distribution for the project’s overall financial outcome.

NPV Profile

A graphical representation showing the relationship between the Net Present Value (NPV) of a project and various discount rates.

Certainty Equivalent NPV

A method that adjusts the net present value (NPV) of an investment by incorporating the decision maker's risk aversion, providing a risk-adjusted NPV under certainty.