Calculating opportunity cost of capital on an investment

Reference no: EM13826602

Problem:

1. Of the following, which is most likely to be used to calculate the opportunity cost of capital on an investment?

A. The best available expected return offered in any investment available in the market.

B. The interest rate on 90 day bank bills.

C. The interest rate of any investments' alternatives that are available

D. The best available expected return offered in the market on an investment of comparable risk and term to the cash flow being discounted.

2. Which of the following statements is False?

A. The actual return kept by an investor will depend on how the interest is taxed.

B. The equivalent after-tax interest rate is r(1- T)

C. The highest interest rate, for a given horizon, is the rate paid on Australian government securities with a similar term.

D. It is important to use a discount rate that matches both the term and the risk of the cash flows.

Summary

These short questions basically belong to Finance. The 1st question is about the option employed for calculating opportunity cost of capital on an investment. The 2nd question is about finding a false statement.

Reference no: EM13826602

Questions Cloud

Questions are about finding true and false statements : Which of the following statements is FALSE?

Cite some of the good and poor marketing plans : Cite Some Of The Good And Poor Marketing Plans

Yield to maturity of the three-year : The above table shows the price per $100 face value of several risk-free, zero-coupon bonds. What is the yield to maturity of the three-year, zero-coupon, risk-free bond shown?

Explain what is meant by increasing opportunity costs : These three problems related to Business Economics. The 1st problem is about retrofitting a production line with new production technique which is about half the cost of current production line.

Calculating opportunity cost of capital on an investment : Of the following, which is most likely to be used to calculate the opportunity cost of capital on an investment?

Construct a ten to thirty page business plan : Construct a ten to thirty page business plan - Describe strategic planning techniques used to formulate alternative strategies designed to achieve stated business goals.

Explores the contributing factors from british petroleum : This is a case study in management. The case study explores the contributing factors from British Petroleum in the Gulf of Mexico oil spill

Outlines the major components of the ethical considerations : Evaluate the ethical considerations and issues for each stakeholder involved (e.g., patient, parents, providers, administrators, etc.) relative to the issue of Sandra remaining on life support upon the determination that she had no brain wave func..

Prepare a proposal for an online business : Prepare A Proposal For An Online Business

User Account

All Pages