Difference between revisions of "Opportunity cost"
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According to [[Fundamentals of Financial Management by Eugene F. Brigham and Joel F. Houston (15th edition)]], | According to [[Fundamentals of Financial Management by Eugene F. Brigham and Joel F. Houston (15th edition)]], | ||
:[[Opportunity cost]]. The rate of return you could earn on an alternative investment of similar risk. | :[[Opportunity cost]]. The rate of return you could earn on an alternative investment of similar risk. | ||
| + | :[[Opportunity cost]]s. The best return that could be earned on assets the firm already owns if those assets are not used for the new project. | ||
==Related concepts== | ==Related concepts== | ||
Revision as of 04:24, 2 November 2019
Opportunity cost is a cash flow that a firm must forgo in order to accept a project. For example, if the project requires the use of a building that could otherwise be sold, then the market value of the building is an opportunity cost of the project.
Definitions
According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),
- Opportunity cost. A cash flow that a firm must forgo in order to accept a project. For example, if the project requires the use of a building that could otherwise be sold, then the market value of the building is an opportunity cost of the project.
According to Fundamentals of Financial Management by Eugene F. Brigham and Joel F. Houston (15th edition),
- Opportunity cost. The rate of return you could earn on an alternative investment of similar risk.
- Opportunity costs. The best return that could be earned on assets the firm already owns if those assets are not used for the new project.
Related concepts
- Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.
