A Capacity Alternative Has an Initial Cost of $50,000 and Cash

question 90

Multiple Choice

A capacity alternative has an initial cost of $50,000 and cash flow of $20,000 for each of the next four years. If the cost of capital is 5 percent, the net present value of this investment is

• A) greater than $80,000
• B) greater than $130,000
• C) less than $30,000
• D) Impossible to calculate, because no interest rate is given.
• E) Impossible to calculate, because variable costs are not known.

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Definitions:

Policy Makers

Individuals or groups involved in the process of making decisions and policies for a society or organization, typically within government institutions.

Ad Hoc

Formed, arranged, or done for a particular purpose only.

Financial Crisis

A situation where the value of financial institutions or assets drops significantly, often leading to panic and economic downturn.

Correctional Costs

Correctional costs refer to the expenses involved in operating the criminal justice system, particularly those related to incarceration, rehabilitation, and supervision of offenders.