opportunity cost

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opportunity cost

the amount of money that is alienated by choosing to use it for one project rather than another, i.e. the opportunity to make a profit by investing in another project is lost.
References in periodicals archive ?
The following section shows that the opportunity cost of capital for investing in venture capital or private equity increases with illiquidity and with under-diversification.
This observation suggests that the reduction in the opportunity cost of capital of large public companies or hedge funds outweighs the potential improvement in governance associated with private partnerships.
Building on Ingersoll and Ross's insight that waiting to invest means keeping alive a call option on the opportunity cost of capital, Berk (1999) presented a simple investment rule that offers an unambiguous theoretical relationship between market interest rates and fixed investment.
Second, although it is important to point out evidence against the CAPM, it is even more important to provide a valid alternative for computing the opportunity cost of capital.
This includes both the costs of failure and the opportunity cost of capital.
As assumed, the entrepreneur and the investor face the same opportunity cost of capital.
The potential loss of income to the seller is based on an investor's estimated opportunity cost of capital.
Our focus in this section is, therefore, on imperfections, such as taxes, that drive a wedge between the opportunity cost of capital in the public and private sectors.
The opportunity cost of capital (OCC) represents the opportunity to earn an expected rate of return elsewhere at the same level of risk.
But investors are simply applying an age-old textbook valuation model--present value equals future cash flow streams discounted at the opportunity cost of capital.
Nevertheless, it would be incorrect to use the opportunity cost of capital in holding-cost calculations to measure the effects of inventory reduction.

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