Business Costs
6. 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
like labor and materials. It also estimates that it could sell about $225,000-worth of ovens each year. Would it
pay the firm 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.