Suppose that a firm has a sum of Rs.100000 which it has only two alternative uses. It can either buy a printing machine or alternatively a lathe machine, both having a productive life of 10 years. From the printing machine , the firm expects an annual income of Rs. 20,000 and from the lathe, Rs. 15,000. A profit maximizing firm would invest its money in the printing machine and forego the expected income from printing machine is the expected income from the lathe i.e.. Rs.15000.
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