Lara Technologies is considering a total cash outlay of $250,000 for the purchase of land, which it could lease out for $35,000 per year. If alternative investments are available that yield a 12% return, the opportunity cost of the purchase of the land is
A) $35,000
B) $30,000
C) $250,000
D) $4,200

Question

Quizplus · Accepted Answer

The opportunity cost is the return foregone from the next best alternative investment. Here, the alternative investment yields 12% on $250,000, which is $250,000 * 0.12 = $30,000.

Lara Technologies Is Considering a Total Cash Outlay of $250,000