Megastar Software recently developed new spreadsheet software, Ad-soon, which to
ID: 379537 • Letter: M
Question
Megastar Software recently developed new spreadsheet software, Ad-soon, which to market by mail through ads in computer magazines. Just prior to introducing Ad-soon, Megastar received an unexpected offer from vision computer company to buy all rights to the software for £4 million cash (information) Question: Might there be any other opportunity costs to consider at thte time of the making this decision? If so,explain briefly. (Please answer in paragraph by critical thinking) Megastar Software recently developed new spreadsheet software, Ad-soon, which to market by mail through ads in computer magazines. Just prior to introducing Ad-soon, Megastar received an unexpected offer from vision computer company to buy all rights to the software for £4 million cash (information) Question: Might there be any other opportunity costs to consider at thte time of the making this decision? If so,explain briefly. (Please answer in paragraph by critical thinking) Megastar Software recently developed new spreadsheet software, Ad-soon, which to market by mail through ads in computer magazines. Just prior to introducing Ad-soon, Megastar received an unexpected offer from vision computer company to buy all rights to the software for £4 million cash (information) Question: Might there be any other opportunity costs to consider at thte time of the making this decision? If so,explain briefly. (Please answer in paragraph by critical thinking)Explanation / Answer
Besides considering the cost of production of Ad-Soon, Megastra must consider the opportunity cost of the decision. It may be possible that the Company would be gaining from taking $4million in cash immediately. However, it must take into account the future cash flows that would be generated if the offer is not accepted. This would be by way of sales of Ad-Soon. All relevant costs would have to be estimated to arrive at the net cash flows from sales of the product if the offer is not taken. The cash flows from sales of the product should then be discounted to arrive at the expected present value of the opportunity of selling the product in future. This value should then be compared with the $4 million that is being immediately received to assess whether the decision to accept the offer is better or the decision to go ahead with the opportunity is better.