The appropriate opportunity cost of capital is the return that investors give up on alternative investments with:
A)the same risk.
B)the risk-free return.
C)the expected return on the TSX 300.
D)the normal, common stock risk premium.

Question

Quizplus · Accepted Answer

The appropriate opportunity cost of capital is the return that investors give up on alternative investments with the same risk. This reflects the minimum return that investors require to compensate them for the risk they are taking on. Choosing options B, C, or D would not be appropriate as they do not reflect the same level of risk as the investment being considered.

The Appropriate Opportunity Cost of Capital Is the Return That