In Calculating the Net Present Value of an Investment in Equipment,the

question 65

True/False

In calculating the net present value of an investment in equipment,the required investment and its terminal residual value should be subtracted from the present value of all future cash inflows.

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Definitions:

Long Run

In economics, a period in which all inputs can be adjusted by firms, and there are no fixed costs, allowing for full industry adjustment.

Diminishing Returns

An economic principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, begins to decrease.

Marginal Cost

The change in total production cost that arises when the quantity produced is incremented by one unit.

Fixed Cost

Expenses that do not change in proportion to the activity of a business, such as rent, salaries, and loan payments.