If a Project Promises to Generate a Higher Rate of Return

question 67

Multiple Choice

If a project promises to generate a higher rate of return than the firm's cost of capital, accepting the project will:

• A) increase ROI.
• B) decrease ROI.
• C) increase payback.
• D)decrease payback.

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Definitions:

Average Fixed Cost

The fixed costs of production (costs that do not change with the level of output) divided by the quantity of output produced, which decreases as output increases.

Total Product

The total quantity of output produced by a firm during a given time period with a given amount of inputs.

Supply Curve

A graphical representation showing the relationship between the price of a good and the quantity supplied by producers.

Minimum Point

The lowest point on a curve, often referring to the least cost or output level in various economic or mathematical models.