With a Budget of $200 Million, the Government Can Choose

question 8

Multiple Choice

With a budget of $200 million, the government can choose to purchase 4 helicopters or repair 200 km of highway. FIGURE 1- 1
-Refer to Figure 1- 1. For the government, the opportunity cost of one search and rescue helicopter is

• A) 50 kilometres of highway repair.
• B) 150 kilometres of highway repair.
• C) 0 kilometres of highway repair.
• D) 200 kilometres of highway repair.
• E) 100 kilometres of highway repair.

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Definitions:

Non-Normal Cash Flows

Cash flow patterns that don't follow a regular, predictable pattern, often encountered in investment analysis.

MIRR

Modified Internal Rate of Return, a financial metric that accounts for the cost of capital and assumes positive cash flows are reinvested at a firm's reinvestment rate.

NPV

Net Present Value, a method used in capital budgeting to evaluate the profitability of an investment, calculating the present value of cash inflow minus the present value of cash outflow.

IRR

Internal Rate of Return; a financial metric used to evaluate the profitability of potential investments based on cash flows.