7. Another example of opportunity cost is a company's cost of capital. Suppose a manufacturer wants to add

microwave ovens to its product line. To do this, it must invest $500,000 in new equipment.


Besides the original investment, the company estimates it would spend $200,000 per year on production

costs for labor and materials. It also estimates that it could sell about $225,000 worth of microwave ovens

each year. Would it benefit the company to manufacture the microwave ovens if it could earn 10 percent

interest by purchasing U.S. Treasury bonds with the $500,000? Explain your answer.

Answers

Answer 1

Answer:

You should invest in US bonds because you will be able to earn a higher return than if you build and sell microwaves.

Explanation:

alternative 1, build and sell microwave ovens:

initial outlay = $500,000

net cash flow per year = $225,000 - $200,000 = $25,000

alternative 2, invest in US securities:

investment = $500,000

net cash flow per year = $500,000 x 10% = $50,000

Opportunity costs are the benefits lost or extra costs resulting from choosing one activity or investment over another.

If you choose to build and sell microwaves, you will not be able to invest in bonds, and therefore, your net income will decrease by $25,000 - $50,000 = -$25,000.

Instead, if you invest in bonds and not microwaves, your net income will increase by $50,000 - $25,000 = $25,000.

Answer 2

You should invest in US bonds because you will be able to earn a higher return than if you build and sell microwaves.

The calculation is as follows:

alternative 1, build and sell microwave ovens:

initial outlay = $500,000

So,

net cash flow per year = $225,000 - $200,000 = $25,000

now

alternative 2, invest in US securities:

investment = $500,000

net cash flow per year = $500,000 x 10% = $50,000

In the case when  you choose to build and sell microwaves, you will not be able to invest in bonds, and therefore, your net income will decrease by $25,000 - $50,000

= -$25,000.

Now

Instead, if you invest in bonds and not microwaves, your net income will increase by $50,000 - $25,000

= $25,000.

learn more: https://brainly.com/question/26115859?referrer=searchResults


Related Questions

Part A
In the video, what tax cut is President Obama extending?

Answers

maybe the tax cut for the middle class or the payroll tax

Answer: He is announcing an extension of a cut in payroll taxes.

Explanation: edmentum/ plato

A copyright protects a company that uses an original author's work without permission. (6 points)

True
False

Answers

Answer:

false

Explanation:

copyright protects the author's work when it is used without permission.

Answer:

es Falso

Explanation:

esperó que te sirva marcarme como mejor respuesta PORFA y gracias

What is a stock symbol?

Answers

Answer:

A stock symbol is an arrangement of characters—usually letters—representing publicly-traded securities on an exchange. When a company issues securities to the public marketplace, it selects an available symbol for its shares, often related to the company name.

Explanation:

What are the two parts of the platform used to run application software? GUI and HCI hardware and operating system kernel and software configuration application base and operating system

Answers

Answer:

The answer is B

Explanation:

Answer:the answer is B hardware and operating system

Explanation:

The expected rate of return on Happy Dog Soap's stock over the next year is ---------.

The expected rate of return on Black Sheep Broadcasting's stock over the next year is------.

Answers

Answer:

The first part of the question is missing, so I looked for it.

The expected rate of return on Happy Dog Soap's stock over the next year is:

= (return if market is strong x probability of strong market) + (return if market is normal x probability of normal market) + (return if market is weak x probability of weak market) = (33% x 0.25) + (20% x 0.45) + (-26% x 0.30) = 9.45%

The expected rate of return on Black Sheep Broadcasting's stock over the next year is:

same formula as before = (46% x 0.25) + (26% x 0.45) + (-33% x 0.30) = 0.133%

A regional automobile dealership sent out fliers to prospective customers indicating that they had already won one of three different​ prizes: an automobile valued at ​$28 comma 000​, a ​$100 gas​ card, or a ​$5 shopping card. To claim his or her​ prize, a prospective customer needed to present the flier at the​ dealership's showroom. The fine print on the back of the flier listed the probabilities of winning. The chance of winning the car was 1 out of 31 comma 248​, the chance of winning the gas card was 1 out of 31 comma 248 comma and the chance of winning the shopping card was 31 comma 246 out of 31 comma 248. Complete parts​ (a) through​ (c).

Answers

Answer:

the requirements are missing, so I looked for a similar question.

a. How many fliers do you think the automobile dealership sent​ out?

b. Using your answer to​ (a) and the probabilities listed on the​ flier, what is the expected value of the prize won by a prospective customer receiving a​ flier?

c. Using your answer to​ (a) and the probabilities listed on the​ flier, what is the standard deviation of the value of the prize won by a prospective customer receiving a​ flier?

a) the total fliers sent out = 31,246 + 1 + 1 = 31,248

b) expected value = [(1 x $28,000) + (1 x $100) + (31,246 x $5)] / 31,248 = $5.90

c) σ² = [($28,000 - $5.90)² x 1] + [($100 - $5.90)² x 1] + [($5 - $5.90)² x 31,246] / 31,248 = ($783,669,634.80 + $8,854.81 + $25,309.26) / 31,248 = $25,080.13

σ = √$25,080.13 = $158.37

A type of investment that gives a person a share of ownership in a company
is a
A. savings account
O B. bond
O c. stock
O D. hedge fund

Answers

The answer is C-stock I think

A type of investment that gives a person a share of ownership in a company is a stock. Thus, option (c) is correct.

What is a stock?

A stock is a type of investment that gives a person a share of ownership in a company. When a person buys a stock, they become a partial owner of the company and are entitled to a portion of the company's profits.

Stocks are traded on the stock market, and their prices can fluctuate depending on a variety of factors, such as the company's performance, investor sentiment, and overall market conditions. Stocks are important because they provide investors with the potential to earn returns on their investments, and they provide companies with capital to fund their operations and growth.

Therefore, it can be concluded that a type of investment that gives a person a share of ownership in a company is a stock. Hence, option (c) is correct.

Learn more about stock, here:

https://brainly.com/question/29992015

#SPJ7

Which type of economy is used by the United States?
HELPPPPPPPPP

Answers

Answer:

mixed economy

Explanation:

The United States has a mixed economy. It works according to an economic system that features characteristics of both capitalism and socialism.

mixed economy

The United States has a mixed economy. It works according to an economic system that features characteristics of both capitalism and socialism

Other Questions
Light behaves in specific ways. It can be reflected, refracted, or absorbed, and under certain conditions, run into different kinds of interference. Which explanation best describes why light is refracted as it enters water? A. The light bends when it enters water due to its reflection. B. The speed of light remains the same as it moves from air to water, causing the light to reflect. C. The speed of light increases when it enters a different medium, but it doesn't bend. D. The speed of light changes as it moves from air to water, causing the light to bend. Examine Don's decision. Instead of complaining about the poor service at a restaurant,he decides not to leave a gratuity. "That will send the right message without causing aconflict," he says. Hi hope your having a good day please answer this17. Name the word that matches the definition given: Figures that have the same shape but not necessarily the same size.A. similar figuresB. scale factorC. scaleD. congruent figures Micah found the least common multiple of 8 and 12. His work is shown below.Multiples of 8: 8, 12, 16, 20, 24, 28, . . .Multiples of 12: 12, 24, 36, 48, 60, . . .The least common multiple is 12.What is Micahs error? HELP QUICK What is the mass of an object that has a volume of 2 ml and a density of 10g/ml? Which best explains why the sun maintains its size and shape?A. Pressure caused by high temperatures are balanced by gravity.B. The sun burns from its core to its surface.C. Forces exerted by orbiting planets cause the sun to rotate. HELP WITH WAS/WERE GUYSSSS During 20x1, Orca Corp. decided to change from the FIFO method of inventory valuation to the weighted-average method. Inventory balances under each method were as follows:________. FIFO Weighted-averageJanuary 1, 20x1 $71,000 $77,000December 31, 20x1 $79,000 $83,000Orca's income tax rate is 30%.In its 2005 financial statements, what amount should Orca report as the cumulative effect of this accounting change?a) $2,800b) $4,000c) $4,200d) $6,000 What is 6+6+2need to actually ask something to give away points or the bots will report lol PLEASE HELP!1. How does a clock and its internal and intricate mechanical parts make up a system(Explain)2. Is it a living or nonliving system? (Explain)3. How may it support a living system? (Explain) 4. Therefore what is an good example of a definition of a system? Solve for the indicated variable. A = LW, solve for W How can heart rate and respiratory rate be used to determine if someone is lying? Provide a detailed answer. To narrow one's focus in order to become an expert at producing a particular good or service is to __________.A.specializeB.expandC.enlargeD.contractPlease select the best answer from the choices providedABCD Which definition of intelligence is based on the Turing test? What do you think are some of the challenges facing those restoring the Hagia Sophia? 2(4+c)=67 help solve for c Why does Hitchcock call the art of suspense in his movies letting the audience play God? Analyze the meaning of the metaphor as Hitchcock intends it, referring to examples in the text. Who was the last confederate soldier to surrender A. Fredrick Douglass B. Sen. James Henry Lane C. Gen. Stand Watie D. Col. William Quantrill Pleaseee help me with my math show work please I need the work if you have instructions or knowledge to complete a task you have