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x M plans - seabrool xConnectx ure | https://newconnect.mheducation.com/flow/connect.html gToast- Cust New Tab xSign In Saved Help The opportunity cost of capital is equal to: Multiple Choice the discount rate that makes the project NPV equal zero. the return that shareholders could expect by investing their money in the financial markets. a project's internal rate of return. the average rate of return for a firm's projects. K Prey 18 of 30il Next > harm your computer. Do you ey fof 8e 8-11.swf anyway? Keep Discard

Explanation / Answer

Answer. The return that shareholders could expect by investing their money in the financial market.

It can be defined as the expected return that is forgone by investing in a project rather than in comparable financial securities.

The opportunity cost of capital of a company increases as it takes riskier projects.
Example:
Company A wants to build a new factory. It requires 10 lakhs capital to build this factory. Company A does not have so much capital available so it wants to borrow this amount from the market in the form of debt. Suppose bank B lends this amount to A. B requires return of 10% on this amount. So opportunity cost of capital for company A for this project becomes 10%.

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