Question
A tailor estimates that over the next year 60,000 special zippers will be used in the manufacture of men's jackets. A supplier of closures has
A tailor estimates that over the next year 60,000 special zippers will be used in the manufacture of men's jackets. A supplier of closures has quoted a price of $0.60 per closure. The tailor would prefer to purchase 5,000 units per month, but the supplier cannot guarantee this delivery schedule. To ensure the availability of these zippers, the tailor is considering purchasing the 60,000 units at the beginning of the year.
Assuming that the tailor can invest cash at 8%, how much would be the tailor's opportunity cost of buying the 60,000 units at the beginning of the year?
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Fundamentals of corporate finance
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
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