The Larger the Implicit Cost of a Business

question 46

Multiple Choice

The larger the implicit cost of a business:

• A)the greater accounting profit will be.
• B)the smaller economic profit will be.
• C)the more successful the venture will be.
• D)the smaller the explicit cost will be.

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Definitions:

Discount Rate

The interest rate used to discount future cash flows to their present value, reflecting the time value of money and risk.

Initial Investment

The initial outlay of money required to start a project, purchase an asset, or invest in a business venture.

Useful Life

The estimated period over which an asset is expected to be usable for the purpose it was acquired.

Salvage Value

The anticipated remaining value of an asset at the conclusion of its operational life.