Which of the following best represents the opportunity cost of investing in capital?
A)the actual revenue stream generated by the investment
B)the expected revenue stream generated by the investment
C)the profit that investment is expected to generate
D)the market interest rate
E)the purchase price of the plant and equipment

Question

Quizplus · Accepted Answer

Opportunity cost of investing in capital is the return given up from the next best alternative investment opportunity. The market interest rate represents the return that could have been earned through alternative investments of similar risk. Options A, B, and C do not represent opportunity cost as they are related to actual or expected returns from the investment itself, while option E represents the actual cost of purchasing the capital but not the opportunity cost.

Which of the Following Best Represents the Opportunity Cost of Investing