If a Project's Expected Rate of Return Exceeds Its Opportunity

question 35

Multiple Choice

If a project's expected rate of return exceeds its opportunity cost of capital,one would expect:

• A) the profitability index to be negative.
• B) the opportunity cost of capital to be too low.
• C) the project to have a positive NPV.
• D) the NPV to be zero.

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Definitions:

Daily Wage

The amount of money that a worker earns for one day of work.

Marginal Product

The supplementary yield obtained from utilizing an additional unit of a specific input, assuming all other inputs remain constant.

Labor Supply Curve

A graphical representation showing the relationship between the quantity of labor that workers are willing to offer and the wage rate.

Opportunity Cost

Opportunity cost represents the benefits an individual, investor, or business misses out on when choosing one alternative over another.