David Has the Following Information to Evaluate-His Current Salary of $62,000

question 175

Multiple Choice

David has the following information to evaluate-his current salary of $62,000 versus total revenues of $110,000 and expenses of $67,000 from starting a new business.How much is the opportunity cost associated with staying at his current job?

• A)$5,000
• B)$43,000
• C)$62,000
• D)$177,000

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Definitions:

Flotation Costs

Expenses incurred by a company in issuing new securities, including legal, administrative, and underwriting fees.

Computed NPV

The calculated Net Present Value based on a specific discount rate and series of cash flows.

Perpetual Cash Flows

Cash flows that are expected to continue indefinitely without an end.

D/E Ratio

Debt-to-Equity Ratio, a measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity.