Jarrett Company is considering a cash outlay of $300,000 for the purchase of land,which it could lease out for $36,000 per year.If alternative investments are available that yield a 9% return,the opportunity cost of the purchase of the land is
A) $27,000
B) $36,000
C) $9,000
D) $72,000

Question

Quizplus · Accepted Answer

The opportunity cost is the return foregone by not investing the $300,000 at the 9% alternative rate, which is $300,000 * 9% = $27,000.

Jarrett Company Is Considering a Cash Outlay of $300,000 for the Purchase