NEW MyLab Finance with Pearson eText -- Access Card -- for Fundamentals of Corporate Finance
NEW MyLab Finance with Pearson eText -- Access Card -- for Fundamentals of Corporate Finance
3rd Edition
ISBN: 9780133543889
Author: Jonathan Berk, Peter DeMarzo, Jarrad Harford
Publisher: PEARSON
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Chapter 9, Problem 15P
Summary Introduction

Incremental Earning: Incremental Earnings are the amounts which are expected to change the earning of the firms due to the investment decision of the firm. It comprises of the amounts which are going to influence firms earning in some future period due to the impact of the particular project. Incremental earnings should include all the incremental revenue and cost associated with the project.

Opportunity cost: The cost of the foregone opportunity is called opportunity cost. It is the lost benefit that would come from alternative opportunity to the firm. This is the given up opportunity which would have given benefits if the decision was taken.

To determine:

The effect of opportunity cost on the incremental net earnings of the firm.

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