opportunity cost

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opportunity cost

the opportunities foregone in undertaking one activity measured in terms of the other possibilities that might have been pursued using the same expenditure of resources. While opportunity cost is mainly a concept in economics, it also applies more generally to human existence. For example, given the finitude of time in the human life-span and the impossibility of doing many activities more than one at a time or other than in one-to-one interactions, opportunity costs are involved in many human activities, not only those in which economic resources are involved.
References in periodicals archive ?
opportunity cost of capital is, on the other hand, only an effectiveness standard for an investment project, which is included in the formula given it is used to compute (financial) value of investment project.
The key to classify [PI](T) lies in the formations of the retailer's annual opportunity cost of capital.
Light and Warburton (6) also take issue with the notion that the opportunity cost of capital is a legitimate resource cost.
And The Opportunity Cost Of Capital Business Studies Journal, 4 (2), 101-115.
We make use of CAPM to estimate the opportunity cost of capital for venture capital investment of well-diversified investors.
presumably is to set prices which only allow a 'normal', 'natural' or 'reasonable' rate of profit on new investment to be received by the firms and industries in question, that is, to set prices which reflect the opportunity cost of capital for the particular industry under consideration.
Therefore selecting the mutually exclusive project option with the highest NPV may not result in the socially optimal outcome if the opportunity cost of capital is uncertain and not entirely reflected by the discount rate.
This model simplifies the farmland valuation problem and expresses current farmland values as a function of current income produced by farmland, the opportunity cost of capital or discount rate, and the constant rate at which income is expected to grow in the future, as shown below:
The second paper, written by Graham Glenday, "The new (but old) approach to the economic opportunity cost of capital," elaborates on the calculation of the economic cost of capital and discusses how risk should be addressed.
In equilibrium, the opportunity cost of capital, r[V.
It is the opportunity cost of capital that will be one of our chief guides in making investment decisions.
First, the opportunity cost of capital tends to fall since the idiosyncratic risk is spread over a diversified shareholder base.
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