Opportunity costs


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Opportunity costs

The difference in the actual performance of a particular investment and some other desired investment adjusted for fixed costs and execution costs. It often refers to the most valuable alternative that is given up.

Opportunity Cost of Capital

The difference in return between an investment one makes and another that one chose not to make. This may occur in securities trading or in other decisions. For example, if a person has $10,000 to invest and must choose between Stock A and Stock B, the opportunity cost is the difference in their returns. If that person invested $10,000 in Stock A and received a 5% return while Stock B makes a 7% return, the opportunity cost is 2%. One way of conceptualizing opportunity cost is as the amount of money one could have made by making a different investment decision. Importantly, opportunity cost is not a type of risk because there is not a chance of actual loss.
References in periodicals archive ?
Although the individual company may be economically viable, the return on time and capital to the individual venture capitalist is less than the opportunity cost.
O'Donnell (2009) uses the controversy over the Ferraro and Taylor question to argue that opportunity cost is neither fundamental nor simple.
Therefore, the opportunity costs imposed on a company by the intractable landlord or the landlord with no mechanism or ability to address such incremental corporate expansion needs will indeed exact a price on shareholder value.
Regardless, these value-to-rent multiple levels clearly indicate that investors have a very low opportunity cost for funds, they expect incomes to grow substantially in the future, or both.
They cannot be accounting profits because the student has already been told that accounting profits neglect opportunity costs.
The simple economic logic of opportunity cost and comparative advantage makes it clear that Americans would benefit from freer trade.
One reason may be that if you come to see time as money, you will feel more stressed because even when you're not at work, the opportunity costs of not working will weigh more heavily on you.
Contracting and legal costs, including the monetary and opportunity costs involved in contracting, renegotiating or vendor dispute settlements.
In general, a wife's education might have both opportunity costs and attitudinal effects, so the problem is disentangling the two forces.
The increased opportunity costs of the first part of the year continued to damp money growth into the second quarter, but, in addition, liquid balances were drawn down to meet large April tax payments.
But they also see the sometimes complicated landscape in terms of tax implications, regulatory compliance and other opportunity costs.

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