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 S&P 500 index.
D) the normal, common stock risk premium.

Question

Quizplus · Accepted Answer

The appropriate opportunity cost of capital should reflect the return that investors give up on alternative investments with the same risk level. This ensures that investors are appropriately compensated for the level of risk they are taking. Choosing B, C, or D would not accurately reflect this principle.

The Appropriate Opportunity Cost of Capital Is the Return That