Which of the Following Is NOT One of the Simplifying

question 58

Multiple Choice

Which of the following is NOT one of the simplifying assumptions made for the three main methods of capital budgeting?

• A)The firm pays out all earnings as dividends.
• B)The project has average risk.
• C)Corporate taxes are the only market imperfection.
• D)The firm's debt-equity ratio is constant.

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Definitions:

Consumer Demand

The desire by consumers to purchase goods and services, quantified by the amount of a product people are willing to buy at certain price levels.

Equilibrium Price

The price at which the quantity of a good or service demanded equals the quantity supplied, leading to a stable market condition.

Increasing-Cost Industry

An industry where production costs increase as the industry's output increases, often due to resource limitations or other scaling challenges.

Economic Profits

Profits exceeding the normal return on investment, calculated by subtracting both explicit and implicit costs from total revenues.