To Calculate the Internal Rate of Return on a Factory

question 79

Multiple Choice

To calculate the internal rate of return on a factory that would yield a perpetual future stream of income,one would divide

• A) the annual future payment by the cost of the factory.
• B) the sum of the future payments by the cost of the factory.
• C) the cost of the factory by the rate of interest.
• D) the cost of the factory by the annual future payment.

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Definitions:

Diseconomies of Scale

A situation where a company or organization grows so large that the costs per unit increase.

Long-run

A period in economics sufficient for all markets to adjust to changes, including those made in physical capital or production capacities.

Average Total Cost

The total cost of producing a particular quantity of output divided by the quantity of output produced, encompassing both fixed and variable costs.

Input Prices

The cost of resources used in the production of goods and services.