Which of the Following Assumptions Is Made in Order to Simplify

question 62

Multiple Choice

Which of the following assumptions is made in order to simplify the net present value method?

• A)All cash flows come at the end of the year.
• B)All cash flows are immediately reinvested at the best rate available at the time.
• C)All cash flows come at the beginning of the year.
• D)All cash flows are not reinvested.

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Definitions:

Average Total Cost

The total cost of production divided by the number of goods produced, representing the per-unit cost of production.

Market Price

The current price at which an asset or service can be bought or sold in a given market.

Shut Down

A short-term decision by a firm to cease production due to market conditions, not covering variable costs in the short run.

Average Variable Cost

The total variable costs divided by the quantity of output produced.