Opportunity Cost Of Capital. Opportunity cost of capital the difference in return between an investment one makes and another that one chose not to make. Another way to think about it is let s just say that i buy the building and i sell it at the end of the year.
The goal is always to accept the project with the lower cost of capital which delivers the highest return on investment. For example if a person has 10 000 to invest and must choose between stock a and stock b the opportunity cost is the difference in their returns. Opportunity cost of capital the difference in return between an investment one makes and another that one chose not to make.
The opportunity cost of capital 1.
If the rate of return on the investments is higher than it is on the business project the opportunity cost would be the amount of that difference. 5 of 2 000 000 is 100 000. The opportunity cost is the percentage return lost for rejecting one project and accepting another. This cost is calculated by projecting the rate of return for both the project and the investments.
