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 ?
The point of all of this, for any business or organization, is that there is a huge potential opportunity cost associated with a lack of understanding of the power of your website.
Excluding interest and opportunity cost, purchased feed and homegrown forage accounted for 36.
The purpose of the survey was to assess the respondent's understanding of opportunity cost, arguably one of the most important concepts in the introductory economics curriculum.
As I mentioned earlier, opportunity costs can be caused by various financing-imposed limitations that can impact both equity capital requirements and company operating margins.
Various consulting firms have used techniques along the lines suggested herein to resolve the problem by attributing the relevant opportunity costs to fixed costs formerly assumed to be sunk.
The opportunity cost of a vacant assisted living unit will typically be about $24,000 per year (see "Opportunity cost of vacant units," right).
There must be a meaningful assessment of the opportunity costs of a large, simple, but expensive WTST.
If opportunity costs are not included as costs, then some proposals may appear to be better just because they use existing government resources.
Table 2 provides the opportunity costs of the E-V approximation for the data sets.
The kinds of projects involved, the complexity of benefits, and the presence of opportunity costs have all contributed to make the evaluation problem more difficult.
Since mid-1994, the velocities have been moving more nearly in line with their historical patterns with respect to changes in opportunity costs -- albeit at higher levels.

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