If a firm has the option of leasing some factory space to another firm or utilizing it for another product line, then if the firm chose the product line how should it handle the lost lease payments on the factory space?

Question

Quizplus · Accepted Answer

The lost lease payments represent an opportunity cost for the firm. Therefore, including it as an opportunity cost would be the most appropriate way to handle it in the decision-making process. Ignoring it or including it as additional revenue for the project would not accurately reflect the true cost of the decision.

If a Firm Has the Option of Leasing Some Factory