3. a Determination of Lost Opportunity Cost for an Interest Free Loan If a loan is made without charging interest, the gains from a return on invest- ment are lost. Present Value can be used to determine the actual cost in lost opportunity when an interest-free loan is made. The amount of interest that would have been earned on an investment is used as the basis for IRS taxation. The Income Tax must be paid on the lost opportunity cost of the interest-free loan. The individual who makes the loan owes the Income Tax; the IRS as- sumes that the interest at current market rates has been earned. The ranking of tax expenditures is expressed in a Present Value table in the U. S. Budget to demonstrate revenue loss to the government each year. If a loan of $88,800 is made and no interest is charged, how much will the lost opportunity cost be if the money is paid back at the end of four years with no interim payments and the discount rate is 6%? Round the exponential factors to four places and amounts to whole dollars. How much will the lost opportunity costs be if the money is paid back in four equal annual payments and the discount rate is 6%? How much in lost opportunity costs do the installments save over deferral of the total payment of the loan until the end of the fourth year