Opportunity Cost Of Capital Definition. This may occur in securities trading or in other decisions. Opportunity cost of capital.
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Shareholders can the invest in a financial asset of similar risk to the investment project the firm forgoes. You will run into trouble if it s not. Another way to describe the cost of capital is the opportunity cost of making an investment in a business.
The opportunity cost of capital is the difference between the returns on the two projects.
Shareholders can the invest in a financial asset of similar risk to the investment project the firm forgoes. For example the superior management of business assumes to earn 8 on a long term 10 000 000 investment in a new manufacturing plant or it can invest the cash in assets for which the supposed long term return is 12. Shareholders can the invest in a financial asset of similar risk to the investment project the firm forgoes. This may occur in securities trading or in other decisions.
