The Correct Opportunity Cost for a Project Is Determined to Be

question 108

Multiple Choice

The correct opportunity cost for a project is determined to be 15% and the project is expected to generate $1 million in cash flows at the end of the next four years after an initial outlay of $3 million.Based on this information, the project would plot:

• A)above the security market line.
• B)below the security market line.
• C)on the security market line.
• D)on the security market line, with a Beta of 1.0.

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Definitions:

Law of Diminishing

The principle that states that as one input variable is incrementally increased, there will be a point at which the added output per unit of input will start to decrease, holding all other inputs constant.

Price-elasticity

A measure of how much the quantity demanded or supplied of a good responds to a change in its price.

Digital Media

A form of media that uses digital technology for distribution and presentation of content.

iPads

A line of tablet computers designed and marketed by Apple Inc., which run the iOS and iPadOS mobile operating systems.