Scenario 13-1
Joe wants to start his own business,which will require that he purchase a factory that costs $400,000.Joe currently has $500,000 in the bank earning 3 percent interest per year.
-Refer to Scenario 13-1.If Joe purchases the factory with his own money,what is the annual implicit opportunity cost of purchasing the factory?

Question

Quizplus · Accepted Answer

The implicit opportunity cost of purchasing the factory with Joe's own money is the interest he could have earned on the $400,000 instead of using it to purchase the factory. The annual interest earned on $400,000 at a 3% interest rate is $12,000. Therefore, the annual implicit opportunity cost of purchasing the factory is $12,000.

Scenario 13-1 Joe Wants to Start His Own Business,which Will Require That