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.

---

Definitions:

Columnar Joints

Natural formations of vertically oriented, hexagonal columns of rock, usually found in volcanic basalt, resulting from the cooling and contraction of lava.

Shear Zone

A region of the Earth's crust where rocks have been significantly deformed due to shear stress.

Folded Metamorphic Rocks

Metamorphic rocks that have been subjected to significant pressure and heat, resulting in a folded appearance due to deformation.

Well-developed Cleavage

A property of minerals that allows them to break along flat, parallel surfaces with ease, often a result of their crystal structure.