Consider you have $$100$ and have the following two mutually exclusive options:Option A: Buy a one$-$year wealth management product $($WMP$)$ from your broker which will give you a return of $9\mathrm{.}5\%$ on maturity. And one unit of WMP costs $$25,$ so you can buy $4$ units with your $$100.$Option B: Buy a new machine to increase efficiency of your business, which will raise the return on your business from the current $4\mathrm{.}0\%$ to $6\mathrm{.}3\%$ in a year. And one machine costs $$20,$ so you can buy $5$ machines with your $$100.$Based on accounting cost consideration of the two options, which option will you choose? What is the opportunity cost of your choice?

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To determine which option to choose based on accounting cost consideration we need to compare the re... View the full answer