Which of the Following Statements Is False

question 48

Multiple Choice

Which of the following statements is false?

• A) When evaluating a capital budgeting decision, the correct tax rate to use is the firm's average corporate tax rate.
• B) To determine the capital budget, firms analyze alternative projects and decide which ones to accept through a process called capital budgeting.
• C) A new product typically has lower sales initially, as customers gradually become aware of the product.
• D) Sunk costs have been or will be paid regardless of the decision on whether or not to proceed with the project.

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Definitions:

Financial Planning

The process of framing objectives, policies, procedures, budgets, and financial forecasts for a specific time frame.

Sustainable Growth Rate

The maximum rate at which a company can grow its revenues and profits while maintaining a consistent return on equity and without raising additional equity financing.

External Financing

Funds raised from outside the business, e.g., through borrowing or issuing equity.

Debt-equity Ratio

The ratio reflecting on the strategic use of shareholders' equity and debt for the purpose of financing assets.