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    Opportunity cost of project

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    Your college is considering investing $6 million to add 10,000 seats to its football stadium. The athletic department forecasts it can sell all these extra seats each game for a ticket price of $20 per seat, and the team plays six home games per year. If the school can borrow at an interest rate of 14 per cent, should the school undertake this project? What would happen if the school expected a losing season and could sell tickets for only half of the 10,000 seats?

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    Solution Preview

    It can accept the project if revenues are more than costs

    In the normal case:

    Cost= Investment * Interest rate= 6000000*14%=$840000

    Revenues= Number of seats * ticket price *Number of ...

    Solution Summary

    This provides the steps to calculate the Opportunity cost of project.