Gino's Pizzeria bought a new delivery van last year for $10,000. It can now sell the van for $8,500. To buy this year's model of the same van, Gino would have to pay $11,000. What is the implicit opportunity cost of capital (assuming there is no interest to pay)?
A)$2,500
B)$3,500
C)$1,000
D)$1,500

Question

Quizplus · Accepted Answer

The implicit opportunity cost of capital is the amount of money Gino is giving up by keeping the old van instead of selling it and buying the new one. Since Gino can sell the old van for $8,500 and would have to pay $11,000 for the new one, the implicit opportunity cost of capital is $2,500 ($11,000 - $8,500). Therefore, the best choice is option D.

Gino's Pizzeria Bought a New Delivery Van Last Year for $10,000