The Opportunity Cost of Capital Can Best Be Described as

Hendikeps2 and 8 more users found this answer helpful. However we must ensure that we compare opportunity costs of capital across similar projects.

Opportunity Cost Meaning Importance Calculation And More In 2022 Opportunity Cost Meant To Be Accounting And Finance

The expected rate of return given up by investing in a project rather than in the capital market the return investors would achieve by investing in an SP500 index fund the return investors would achieve by investing.

. A sunk cost is money already spent in the past while opportunity cost is the potential returns not earned in the future on an investment because the. The expected rate of return given up by investing in a project rather than in the capital market. Other things equal this economy will achieve the most rapid rate of growth if.

C The cost involved in seeking new opportunities. Funds that may be acquired to finance a capital outlay. The opportunity cost of capital can best be described as.

Opportunity cost of financing a capital outlay. A form of financing cost. Refer to the above diagram.

Opportunity Cost returns on best Forgone Option - returns on Chosen Option Directly or indirectly opportunity cost underpins the majority of day-to-day economic decisions that are made in society. Opportunity cost is a key concept in economics and has been described as expressing the basic relationship between scarcity and choice. In basic equation form opportunity cost can be defined as.

The value of the best alternative sacrificed when a choice is made. The same thing as an opportunity cost. Opportunity cost of capital is therefore the value of the second best alternative.

All of the above. The actual money expenditure incurred when a decision is made. The weighted average cost of capital WACC represents a firms average cost of capital from all sources including common stock preferred stock bonds and.

In simple terms opportunity cost is the benefit not received as a result of not selecting the next best option. A sunk cost can best be described as. Alternate Projects Must Share Similar Risk Profile.

Project A has an initial cost of 12 million and cash flows with a present value of 45 million. The ratio of capital to consumer goods is minimized. The expected rate of return given up by investing in a project rather than in the capital market The net present value rule states that managers increase shareholder wealth by.

A The cost of an alternative course of action. See the answer See the answer done loading. D The cost incurred in training new staff.

Group of answer choices a cost that has already been incurred and cannot be removed. B The cost of losing an order to a competitor. Opportunity cost is often used by investors to compare investments but the concept can be applied to many different scenarios.

The cash flows of a new project that come at the expense of existing projects. Opportunity cost is best defined as. View full document.

16A major opportunity cost of going to college is 1a fixed cost 2a sunk cost 3an opportunity cost 4an external cost 17The amount of money that could be made by working instead of going to college is best described as 1market economies 2traditional economies 3command economies 4free enterprise economies. Example of the Opportunity Cost of Capital The senior management of a business expects to earn 8 on a long-term 10000000 investment in a new manufacturing facility or it can invest the cash in stocks for which the expected long-term return is 12. If your friend chooses to quit work for a whole year to go back to school for example the opportunity cost of this decision is the years worth of lost wages.

- A company has the opportunity to invest in one of two mutually exclusive projects. Opportunity cost of capital tells us what we are foregoing to choose that best possible alternative. Decrease in stockholder equity due to a capital outlay.

An important cost to include in the capital budgeting process. It represents the degree of perceived risk as well as the rate of return that can be earned by putting money into an investment. Opportunity cost of capital The opportunity cost of capital can best be described as.

Register now or log in to answer. The expected rate of return given up by investing in a project rather than in the capital market The opportunity cost of capital is determined by the ______ of a project. UNIVERSITY OF PHOENIX FIN 571 WEEK 3 CHAPTER QUIZ CHAPTER 8 The opportunity cost of capital can best be described as.

An opportunity cost may best be described as which of the following. The opportunity cost of capital is the difference between the returns on the two projects. The opportunity cost of capital can best be described as.

Importantly opportunity cost is not a type of risk because there is not a chance of actual loss. A The cost of an alternative course of action. This will ensure that we do not see a.

O - 14 mil l 4 mill 26 mill. Project B has an initial cost of 2 million and cash flows with a present value of 5 million. The cost of capital is best described as the.

The total value of all the alternatives given up when a choice. One way of conceptualizing opportunity cost is as the amount of money one could have made by making a different investment decision. For investors cost of capital is the opportunity cost of making a specific investment.

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