A business is considering a cash outlay of $500,000 for thepurchase of land, whi

Question

A business is considering a cash outlay of $500,000 for thepurchase of land, which it intends to lease for $90,000 per year.If alternative investments are available which yield a 12% return,the opportunity cost of the purchase of the land is:
a. $60,000 b. $49,200 c. $70,800 d. $10,800 A business is considering a cash outlay of $500,000 for thepurchase of land, which it intends to lease for $90,000 per year.If alternative investments are available which yield a 12% return,the opportunity cost of the purchase of the land is:
a. $60,000 b. $49,200 c. $70,800 d. $10,800

Explanation / Answer

Cost of Land 500000 Rate of return onalternative 12% investments OpportunityCost of Capital 60000 ( 500,000 *12% )

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