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 ?
Many of their parents probably used the same idea years earlier when deciding who should get up at 3am when the baby fusses, discovering that the opportunity cost is lower for whoever can be more productive the next day, even when sleep deprived.
When the opportunity cost is used to measure the alpha, the number of stocks falls by 27 percent to only a third of the PSEi.
What would be the benefit of a readily available monetary metric that everyone trusted for the opportunity cost of suboptimal performance?
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.
(114) In each case, separate and apart from any conflicts created by divergent cash flow rights, these active investors may have salient alternatives (opportunity costs) that improperly influence their abilities to serve in fiduciary capacities.
Excluding care given by persons above 65, the opportunity costs of informal care amount to $412 billion annually--the estimate rises to $522 billion annually when we include older caregivers (Table 5).
level microeconomics asked, "When would I have learned the concept of opportunity cost? I don't remember hearing that word used in graduate school."
But this is not easy, because there is often a question of opportunity cost. What would have happened otherwise?
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.
As a result, two fundamental drivers generally influence the value of any capital asset including farmland, future earnings and the expected opportunity cost of funds--the rate at which market participants discount future earnings.
(10) This relevant information will likely include items such as opportunity costs and outlay costs.
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.

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