Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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You are considering adding a new software title to those published by your highly successful software company. If you add the new
product, it will use capacity on your disk duplicating machines that you had planned on using for your flagship product, "Battlin"
Bobby. You had planned on using the unused capacity to start selling "BB" on the West coast in two years. You would eventually have
had to purchase additional duplicating machines 10 years from today, but using the capacity for your new product will require moving
this purchase up to 2 years from today. If the new machines will cost $113,000 and can be expensed under Section 179, your marginal
tax rate is 21 percent, and your cost of capital is 14 percent, what is the opportunity cost associated with using the unused capacity for
the new product? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your
answer to 2 decimal places.)
Opportunity cost
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Transcribed Image Text:You are considering adding a new software title to those published by your highly successful software company. If you add the new product, it will use capacity on your disk duplicating machines that you had planned on using for your flagship product, "Battlin" Bobby. You had planned on using the unused capacity to start selling "BB" on the West coast in two years. You would eventually have had to purchase additional duplicating machines 10 years from today, but using the capacity for your new product will require moving this purchase up to 2 years from today. If the new machines will cost $113,000 and can be expensed under Section 179, your marginal tax rate is 21 percent, and your cost of capital is 14 percent, what is the opportunity cost associated with using the unused capacity for the new product? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.) Opportunity cost
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