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

question 61

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.
• C) The present value of $100,000, discounted at the firm's cost of capital, and "borrowed" for the life of the project.
• D) No opportunity cost is involved.

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Definitions:

American Institution

An organization or establishment that is important to the economic, political, social, or cultural fabric of the United States.

Early 20th Century

A period marked by significant global events, including World War I and the start of the Great Depression, that spanned from 1901 to 1930.

Company Towns

Communities where all stores and housing are owned by the one company that is also the main employer, often seen in remote locations or during certain historical periods.

Monopsonies

Market situations in which a single buyer substantially controls the market as the major purchaser of goods and services offered by many would-be sellers.