Consider a firm making a decision to purchase a unit of capital - let's say, a forklift . In terms of capital markets, which of the following would we consider to be the opportunity cost of the forklift
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Question

Quizplus · Accepted Answer

The opportunity cost of the forklift is the value of the next best alternative foregone, which in this case would be the interest the firm could earn by purchasing a bond instead. Option A is not the opportunity cost as it is the benefit of the forklift, not the cost. Option C is the purchase price of the forklift, not the opportunity cost. Option D is the resale value, which is not relevant to the decision to purchase the forklift. Option E is the future stream of MRPs, which is not relevant to the opportunity cost of the forklift.

Consider a Firm Making a Decision to Purchase a Unit