Question

Lara Technologies is considering a cash outlay of $227,000 for the purchase of land, which it could lease out for $36,150 per year. If alternative investments that yield a 15% return are available, the opportunity cost of the purchase of the land is

Answer 1

Answer:

the opportunity cost of the land purchase is $34,050

Explanation:

The computation of the opportunity cost of the land purchase is shown below;

= Cash outlay × return percentage

= $227,000 × 15%

= $34,050

Hence the opportunity cost of the land purchase is $34,050

We simply multiplied the cash outlay with the return percentage so the same would be calculated