Which of the Following Is Considered an Opportunity Cost of Buying

question 103

Multiple Choice

Which of the following is considered an opportunity cost of buying an existing business?

• A) The salary that could be earned working for someone else and the owner's investment in the business
• B) Dividends
• C) The market value of tangible assets
• D) The salary that the business has paid to previous owners

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Definitions:

Capital Investment Analysis

The process of evaluating the advisability of investing in long-term assets, based on potential returns.

Present Value

A rephrased definition denoting the current value of a future amount of money discounted at a particular rate of return.

Internal Rate of Return

A financial metric used to evaluate the profitability of potential investments, calculated as the discount rate that makes the net present value of all cash flows from a particular project equal to zero.

Average Rate of Return

A financial ratio that demonstrates the profitability of an investment by comparing the average annual profit to the initial investment cost.