A 5-Year Project Requires an Additional Commitment of $100,000 in Net

question 45

Multiple Choice

A 5-year project requires an additional commitment of $100,000 in net working capital. What is the opportunity cost associated with this investment?

• A) $100,000
• B) The present value of $100,000 discounted at the firm's cost of capital for 5 years
• C) The present value of $100,000 discounted at the firm's cost of capital for 5 years minus $100,000
• D)No opportunity cost is involved.

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Definitions:

Reporting Financial

Involves the process of preparing financial statements that disclose an organization's financial status to management, investors, and the government.

Projects Vision

A clear and inspiring long-term goal for a project, describing what the project aims to achieve in the future.

Short Term

Pertaining to a limited time frame, often indicating a focus on immediate or near-future considerations rather than long-term planning.

Penetrating Questions

Inquiries that are designed to elicit deep and insightful responses, often uncovering underlying motives or truths.