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.

Question

Quizplus · Accepted Answer

The opportunity cost is the present value of the $100,000, as it is tied up for the life of the project and could have been used elsewhere.

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