Question

present value at opportunity cost ?

1. associative 2. commutative 3. be in straight proportion 4.inversely proportional

Answer 1

Hello

Your required answer is option 4: Inversely Proportional

Opportunity cost is the implied cost of using the capital in a project, which could have been earned by investing it in alternative project and hence, used in evaluating projects. Now, if the opportunity cost is higher, the present value of cashflows tends to be lower and if the opportunity cost is lower, the PV of cashflows tends to be higher and hence, they are inversely proportional.

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