Indicate Whether Each of the Following Statements Is True or False

question 31

Short Answer

Indicate whether each of the following statements is true or false.
1. Internal rate of return measures the difference between an investment's rate of return and the company's required rate of return.
2. A spreadsheet program is useful in doing internal rate of return analyses.
3. Capital investment analyses should take tax consequences into account.
4. Depreciation on equipment or a building has the effect of sheltering some of a corporation's income from income taxes.
5. The amount of a depreciation tax shield is calculated by multiplying the amount of depreciation by (1 - the tax rate).

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Definitions:

Profit Per Unit

The difference between the selling price and the cost of producing or purchasing one unit of a good or service.

Optimal Output

The level of production that maximizes a firm's profit or minimizes its costs, determined by where marginal cost equals marginal revenue.

Price to Clear

The market price at which the quantity supplied equals the quantity demanded, ensuring all goods in the market are sold.

Profit-Maximizing Output

The optimal production stage for a business, where the highest profit is realized at the point where marginal cost equals marginal revenue.