Suppose That a Firm Can Invest $100 Today in a Project

question 73

Multiple Choice

Suppose that a firm can invest $100 today in a project and receive $105 a year from today. There is no inflation, and the annual interest rate in the economy is 6%. The firm should

• A) invest in the project because the opportunity cost is less than the return on the investment.
• B) invest in the project because the opportunity cost is greater than the return on the investment.
• C) invest in the project because the opportunity cost is the same as the return on the investment.
• D) not invest in the project because the opportunity cost is greater than the return on the investment.

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Definitions:

Direct Labour Cost

The cost associated with the work done by those directly involved in the manufacturing of products or the provision of services.

Employee Participation

The involvement of employees in decision-making processes and activities within an organization to improve engagement and performance.

Machine Utilization

The ratio of the actual operating time of a machine to the total available time, reflecting the efficiency of using production equipment.

Product-oriented Layout

A manufacturing layout where equipment and processes are arranged according to the steps required to make a product, emphasizing efficient production flow.