Morgan Infrastructure Group Ltd owns an office block they are considering using for a new project.Currently the office block is being leased out to Blackbeard Caribbean Travel Pty Ltd.The new project however will require all of the office block's available space and hence,if it is undertaken then the lease will have to be terminated.The rent from lease of the existing office space should be considered as ________________ in evaluating the new project.

Question

Quizplus · Accepted Answer

The rent from lease of the existing office space is an opportunity cost because it represents the potential revenue that could have been gained if the space was not used for the new project. It is not a sunk cost because it is a future cost that can be avoided, nor is it a set-up cost because it is not directly related to the implementation of the new project. Similarly, it is not a side effect because it is a direct consequence of terminating the lease.

Morgan Infrastructure Group Ltd Owns an Office Block They Are