Which of the Following Is an Example of an Implicit

question 163

Multiple Choice

Which of the following is an example of an implicit cost?

• A)salaries paid to owners who work for the firm
• B)interest on money borrowed to finance equipment purchases
• C)cash payments for raw materials
• D)foregone rent on office space owned and used by the firm

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Definitions:

Investment Project

An undertaking that involves allocating resources like capital and labor to generate financial returns or achieve strategic goals.

Payback Method

A capital budgeting technique that estimates the time required to recoup the initial investment in a project.

Cash Flows

The inflows and outflows of cash and cash equivalents, representing the operating, investing, and financing activities of an entity.

Net Present Value

The difference between the present value of an investment project’s cash inflows and the present value of its cash outflows.