True or false: When evaluating whether to invest in a project, the investment analysis should consider the investor's marginal rate instead of the average tax rate.

The statement is true because when making investment decisions, it is crucial to consider the marginal tax rate rather than the average tax rate. The marginal tax rate refers to the percentage of tax applied to the next dollar of income earned, which directly affects the additional income generated from an investment. Investors need to focus on how a new investment will impact their taxable income and what tax implications will follow for the returns on that investment.

Using the marginal rate provides a more accurate picture of the after-tax income that will be realized from the investment. This is particularly important for understanding the true profitability of the project and making informed decisions about capital allocation. In contrast, the average tax rate is less relevant to investment decisions because it encompasses all income levels and averaging out individual tax experiences may not reflect the incremental benefits or costs tied to a specific investment.

Therefore, evaluating potential investment opportunities requires an understanding of the investor's marginal tax rate to accurately assess the potential return on investment after considering the tax impact.