Opportunity cost of capital

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Opportunity cost of capital

Expected return that is forgone by investing in a project rather than in comparable financial securities.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
References in periodicals archive ?
The entry-level 130bhp petrol version comes with a six-speed manual transmission, which in the case of the diesel alternative costs PS1,500 more.
The decision to plant or to tap rubber trees depends not only on current prices, but also on alternative incomes and alternative costs. The land, capital and labor that go into producing rubber means the opportunities to build a factory or industrial complex are lost.
Customers also have a monthly 4G LTE data option of paying "by the gig." That alternative costs $12 per gigabyte, and subscribers can pay for just the gigabyte of shared data used each month.
Standardized placement options would allow for greater cost controls, but consulting activities and the requisite intellectual capital to provide appropriate solutions to emerging insurers will create alternative costs that must be divided between clients and insurers.
John West, Ventrix Management and Diamonds all battled it out for a mid-table finish and unfortunately Alternative Costs and DHL made up the bottom places with the latter losing 11 of their 14 games.
For example, a recent price comparison published in Dietetics Today magazine revealed that a standard white loaf costs 13.6p per 100g, but a gluten-free alternative costs 57.3p per 100g - more than four times as much.
Anyway, the alternative costs less and involves no such burden of conscience as I'd have to live with if I chose surgery, not to mention the seeming addiction that goes with it, a dependence that has the patient begging for a repeat more desperately each time.
Then there's the GE MAC 400, a hand-held electrocardiogram (ECG) device that costs $800 (the cheapest alternative costs more than $2,000), and the Tata Swachh, a $24 water purifier (ten times cheaper than its nearest competitor).
"The net result is that the CDCU payday alternative costs the borrower $40, while the payday lenders' short-term loan ends up costing consumers $450."
One participant stated flatly that if the sustainable alternative costs a dollar more than the landfill fee, count him out.

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