The Opportunity Cost of Capital Is Equal To

question 91

Multiple Choice

The opportunity cost of capital is equal to:

• A) the discount rate that makes the project NPV equal zero.
• B) the return offered by other projects of equal risk.
• C) a project's internal rate of return.
• D)the average rate of return for a firm's projects.

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Definitions:

Available-For-Sale Securities

Financial assets that are neither classified as held for trading nor held to maturity, and are recorded at fair value with unrealized gains or losses reported in other comprehensive income.

Held-To-Maturity Investments

Financial assets acquired with the intent and ability to be held until a defined maturity date.

Fair Value Method

An accounting approach to measure and report assets and liabilities at estimates of their current fair market prices.

Unrealized Holding Gain

The increase in the value of an asset that has not yet been sold and, therefore, not reflected in the earnings.