A company that can build a project that will cost $50,000, but returns $52,000 in one year would make a good decision by turning this project down if the interest rate were 3 percent.

Question

Quizplus · Accepted Answer

The project has a positive net return of $2,000 over the cost, and with an interest rate of 3%, the cost of borrowing $50,000 for one year would be $1,500 ($50,000 * 0.03), which is less than the return, making the project financially viable.

A Company That Can Build a Project That Will Cost