Opportunity cost, Managerial Economics

Opportunity Cost

This is the amount that is sacrificed when choosing one activity over the next-best alternative.  In organization, an example of opportunity cost is seen in the concept of the "hurdle rate" used by financial analysts in deciding whether to pursue a particular investment project. In financial analysis, the hurdle rate is the minimum acceptable rate of return wanted to justify the investment in a capital project. If organization managers can demonstrate that a particular project would have a rate of return that is higher than this, they are in effect saying that the advantages of this project exceed the opportunity cost of using the organization funds in this project.

Posted Date: 10/17/2012 1:30:22 AM | Location : United States

Related Discussions:- Opportunity cost, Assignment Help, Ask Question on Opportunity cost, Get Answer, Expert's Help, Opportunity cost Discussions

Write discussion on Opportunity cost
Your posts are moderated
Related Questions
Importance of Income Elasticity If a country is experiencing economic growth, the income of the people will increase.  However, for those engaged in the production of goods wi

How Hospital administrator use concept of managerial economics Hospital administrator can use tools and concepts of managerial economics to determine the optimal allocation of

Fixed costs are those that are independent of output. They should be paid even if firm produces no output. They wouldn't change even if output changes. They remain fixed whether ou

factors influencing the demand for dove soap

“Managerial economics involves use of economic analysis to make business decisions involving the best use of a firm’s scarce resources” Explain the statement with suitable example.

The Frugal Economy In the Frugal economy, households and firms look to the future, and as a result undertake both Saving and Investment. SAVING Saving is income no

Income elasticity of demand The income elasticity of demand measures the degree of responsiveness of the quantity demanded of a product to changes in income.  Its co-efficient

The optimum output and price level is always determined with the concepts of revenue and costs-the difference in joint or independent production will show in the differences in cos

Explain trend projection method of demand forecasting with illustration.