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 whether or not to proceed with the project.

Question

Quizplus · Accepted Answer

The correct tax rate to use when evaluating a capital budgeting decision is the marginal tax rate, not the firm's average corporate tax rate. The marginal tax rate is the rate at which the next dollar of taxable income will be taxed.

Which of the Following Statements Is False