Lara Technologies is considering a total cash outlay of $250,000 for the purchase of land, which it could lease for $35,000 per year. If alternative investments are available that yield a 12% return, the opportunity cost of the purchase of the land is
A)$35,000
B)$30,000
C)$250,000
D)$4,200

Question

Quizplus · Accepted Answer

The opportunity cost is the return foregone by not investing the $250,000 at the alternative rate of 12%. Therefore, the opportunity cost is 12% of $250,000, which equals $30,000.

Lara Technologies Is Considering a Total Cash Outlay of $250,000