The opportunity cost of capital is equal to:
A) the discount rate that makes project NPV equal zero.
B) the return offered by other projects of equal risk.
C) a project's internal rate of return.
D)the average rate of return for a firm's projects

Question

Quizplus · Accepted Answer

The opportunity cost of capital is the return that could be earned on alternative investments of equal risk. It represents the return that investors could earn on alternative investments with similar risks. Therefore, the best option is (B), the return offered by other projects of equal risk.

The Opportunity Cost of Capital Is Equal To