Solution-Appropriate opportunity cost

Appropriate opportunity cost

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Reference no: EM131210675

You are an expert at working with PCs and are considering setting up a software development business. To set up the enterprise, you anticipate that you will need to acquire computer hardware costing $ 100000 (The lifetime of this hardware is five years for depreciation purposes, and straight line depreciation will be used). In addition, you will have to rent an office for $50000/ year. You estimate that you will need to hire five software specialists at $ 50000/ year to work on the software, and that your marketing and selling costs will be $ 100000/ year. You expect to price the software you produce at $100/unit and to sell 6000 units a year. The actual cost of materials used to produce each unit is $ 20. Your tax rate will be 40% and the appropriate opportunity cost is 12%.

a. Should you accept the project?

Reference no: EM131210675

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Appropriate opportunity cost

Reference no: EM131210675

Reference no: EM131210675

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