Hutch Technology Makes Computer Monitors, Which Sell for $100 Each

question 202

Multiple Choice

Hutch Technology makes computer monitors, which sell for $100 each.What is the opportunity cost of 10 monitors?

• A)$1,000
• B)The other goods that could be produced with the resources that produce the 10 monitors
• C)The profits that Hutch earns when 10 monitors are sold
• D)The lost profits that Hutch if the monitors are not produced
• E)All of the responses are correct.

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Definitions:

Terminal Value (TV)

Value of operations at the end of the explicit forecast period; it is equal to the present value of all free cash flows beyond the forecast period, discounted back to the end of the forecast period at the weighted average cost of capital.

Payback Period

The duration of time it takes for an investment to recoup its initial cost, often used to assess the risk or profitability of a project.

Cash Flows

The net amount of cash being transferred into and out of a business, influencing the company's liquidity, solvency, and overall financial health.

Discounted Payback Method

A capital budgeting technique that calculates the time required to recoup the initial investment in present value terms.