Final answer:
The opportunity cost of forgoing the discount on an invoice with 1/7, n/30 terms is the value of the next best alternative that is forgone when the purchaser chooses to not take advantage of the discount. This cost can be calculated by comparing the amount saved with the discount to the amount that would have to be paid without the discount.
Step-by-step explanation:
The opportunity cost is the value of the next best alternative that is forgone when a decision is made. In this case, the purchaser has the option to forgo the discount on the invoice and choose to pay within 1/7 days without any discount. However, by forgoing the discount, the purchaser is giving up the opportunity to save money.
For example, let's say the invoice amount is $1,000 with terms of 1/7, n/30. If the purchaser chooses to forgo the discount and pays within 1/7 days, they have to pay the full amount. But if they take advantage of the discount and pay within 1/7 days, they only have to pay 1/7th of the total amount, which is $1,000 * 1/7 = $142.86. So, the opportunity cost of forgoing the discount is $142.86.
The opportunity cost exists because the purchaser has to compare the benefits of paying quickly with the discount versus the benefits of waiting and giving up the discount. By calculating the potential savings and comparing it with other uses of the money, the purchaser can make an informed decision.