Megastar software recently developed new spreadsheet software, Ad-soon, which it
ID: 2592520 • Letter: M
Question
Megastar software recently developed new spreadsheet software, Ad-soon, which it intends to market by mail through ads in computer magazines. Just prior introducing Ad-soon, Megastar received an unexpected offer from vision computer company to buy all rights to the software for £4 million cash. Question: Might there be any other opportunity costs to consider at the time of thethis decision? If so, explain briefly. (Please answer the question in paragraph by critical thinking ) Megastar software recently developed new spreadsheet software, Ad-soon, which it intends to market by mail through ads in computer magazines. Just prior introducing Ad-soon, Megastar received an unexpected offer from vision computer company to buy all rights to the software for £4 million cash. Question: Might there be any other opportunity costs to consider at the time of thethis decision? If so, explain briefly. (Please answer the question in paragraph by critical thinking ) Megastar software recently developed new spreadsheet software, Ad-soon, which it intends to market by mail through ads in computer magazines. Just prior introducing Ad-soon, Megastar received an unexpected offer from vision computer company to buy all rights to the software for £4 million cash. Question: Might there be any other opportunity costs to consider at the time of thethis decision? If so, explain briefly. (Please answer the question in paragraph by critical thinking )Explanation / Answer
If Megastar decides to go ahead with its plans to market the software and launch it on its own, it would have to reject the offer from Vision Computer Company to purchase the rights to the software for $ 4 million cash.
In other words, Megastar gives up or sacrifices the opportunity of the immediate cash inflows of $ 4 million, if ift goes ahead with its original plans. Therefore, this is certainly an opportunity cost relevant for the financial decision pertaining to the software.
If on the other hand, Megastar decides to take on the offer of Vision Computer Company, it gives up the opportunity of marketing the software and earning revenues therefrom over its estimated life, the present value of which could have been more than $ 4 million. Therefore, the possibility of making more than $ 4 million would be an opportunity cost for the option of accepting the offer. Also, if Megastar accepts the offer, they would not incur advertising costs. Therefore, the saving in advertising costs would also be an opportunity cost.
Other non-financial factors could be : Legal implications, Reputational Issues, Ethical Issues etc.