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4 May, 03:53

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?

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  1. 4 May, 03:55
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    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.
  2. 4 May, 04:06
    0
    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.
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