Opportunity cost refers to the decrease in NPV from a deferral of the receipt of before-tax cash flows.

Question

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Opportunity cost refers to the cost of giving up the opportunity to invest in a different project or investment option that could potentially generate a higher NPV. This means delaying the receipt of cash flows from one project to invest in another could result in a decrease in NPV due to the lost opportunity.

Opportunity Cost Refers to the Decrease in NPV from a Deferral