A five-year project requires an additional commitment of $100,000 in net working capital.What is the present value 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 value of $100,000, netted against the discounted present value of the $100,000 of working capital returned at the end of the project
D)No opportunity cost is involved

Question

Quizplus · Accepted Answer

The opportunity cost is the net effect of the initial $100,000 investment and its return at the end of the project, both adjusted for the time value of money using the firm's cost of capital.

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