1. OPPORTUNITY COST- In the context of capital budgeting what is an opportunity cost? 2. DEPRECIATION-...
1. OPPORTUNITY COST- In the context of capital budgeting what is an opportunity cost?
2. DEPRECIATION- given the choice, would a firm prefer to use MACRS depreciation or straight-line depreciation? why?
Homework Answers
Dear student, only one question is allowed at a time. I am answering the first question
1)
Opportunity cost is the cost of the benefits foregone by an organization in order to take up the project. It is the cost of benefits which will not be received by the organization and have to be foregone in order to take up another project
For example, a person can earn a salary of $1500 per month or he can start his business with a capital investment of $2,000
So, the actual cost of the investment in business will be the amount invested ( $2,000) plus the benefits foregone in the form of salary which will not be received if business is taken up and the total cost will come to ( $2,000 + $1,500 = $3,500)
So, $1,500 is the opportunity cost of doing the business
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1. OPPORTUNITY COST- In the context of capital budgeting what is
an opportunity cost?
2. DEPRECIATION-...
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