Eleanor has money to invest and is considering buying a company. When comparing her alternatives, her _____ on any investment is the rate of return that she could earn on a similar investment.

Question

Quizplus · Accepted Answer

Opportunity cost is the next best alternative foregone when investing in a particular project or asset. In this case, Eleanor needs to consider the rate of return she could earn on a similar investment as the opportunity cost when considering which company to buy. Projected future value, sunk cost, and present value are all important considerations, but they do not necessarily factor in the opportunity cost of choosing a particular investment.

Eleanor Has Money to Invest and Is Considering Buying a Company