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. a. If Joey purchased the factory with his own money, what is the annual implicit opportunity cost of purchasing the factory?

Question

Business

Bennett Hutchinson

23 September, 01:59

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. a. If Joey purchased the factory with his own money, what is the annual implicit opportunity cost of purchasing the factory?

+1

Answers (2)

Know the Answer?

Snowflake · Answer 1

The annual implicit opportunity cost of purchasing the factory is $12,000.

Explanation:

annual implicit opportunity cost = 0.03*400000

= $12,000

Therefore, The annual implicit opportunity cost of purchasing the factory is $12,000.

Burton · Answer 2

12,000

Explanation:

This opportunity cost is calculated by

3%*400,000 = 12,000 in interest

So, the opportunity cost for purchasing a factory is what joe sacrifice in terms of interest from bank. So the amount is 12,000 dollars.