Question

you have learned that the company where you work is being sold for 500000. the companys...

you have learned that the company where you work is being sold for 500000. the companys income statement indicated current profits of 15000, which has yet to be paid out as dividents. if the company is a going concern indefinitely and profit are assumed to grow at a rate of 3 percent. what is assumed opportunity cost?

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Answer #1

Opportunity cost is the amount of benefit foregone, since the company is being sold.

This is the present value of future profits in perpetuity.

Opportunity cost = Current profit / Growth rate

                            = 15,000 / 0.03

                            = 500,000 (Answer)

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