ECO 1192 Chapter Notes - Chapter 4: Mansfield, Opportunity Cost
11 Oct 2016
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An investment is an exchange of something valuable now in exchange for something of a greater value later. Not all investments should be taken and not all can be taken. Cash flows are unaffected by inflation or deflation (for now) Sufficient funds are available to implement all projects. All investments have a cash outflow at the start called first costs/initial investment. It makes sense to undertake a alone, or a with project b, but it does not make sense to undertake b alone. Project b is contingent on project a. ie. project a is building a shopping mall, project b is to make a parking garage for the mall. It wouldn"t make sense to just undertake the parking garage without building the mall too ii. financial constraint. Lectures page 1 ii. financial constraint ie. company is considering building 2 office buildings at different sites, and the cost and benefits of the two are unrelated.
