Suppose a Project Requires an Initial Investment of $1,000 and It

question 108

Multiple Choice

Suppose a project requires an initial investment of $1,000 and it will yield $1,050 one year later.The NPV of the project is:

• A)equal to $50.
• B)less than 0 if the discount rate is less than 5 percent.
• C)zero if the discount rate is equal to 5 percent.
• D)positive if the discount rate is greater than 5 percent.

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Definitions:

Absolute Advantage

The ability of a country, individual, or firm to produce a good more efficiently than another entity, using fewer resources.

Fewer Resources

A situation or condition where there is a reduced availability of inputs or factors of production such as land, labor, and capital.

Comparative Advantage

The ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than competitors.

Opportunity Cost

The expense incurred by not choosing the second-best option when making a decision or selection.