In Translating Construction Cost Cash Flows Across Time to Arrive

question 14

Multiple Choice

In translating construction cost cash flows across time to arrive at the present certainty-equivalent value of the construction cost as of time zero, the opportunity cost of capital OCC) that should be used as the discount rate is best described as follows:

• A) Use the contract interest rate on the construction loan.
• B) Use a rate equal to or only slightly above the riskfree interest rate.
• C) Use the development phase OCC reflecting the leverage in the construction project.
• D) Use the yield on long-term Government bonds.

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Definitions:

Antitrust Policy

Regulations and laws that encourage competition by limiting monopolies, preventing mergers that would restrict competition, and other business practices that would reduce consumer welfare.

Tacit Collusion

An unspoken, informal agreement among competitors to limit competition and keep prices high.

Standard Oil

An American oil producing, transporting, refining, and marketing company established by John D. Rockefeller and partners in the 19th century, which became a highly influential and controversial monopoly.

Antitrust Policy

A set of laws and regulations aimed at promoting competition and preventing monopolies and unethical business practices.