Opportunity Cost

Business / Taxes / Opportunity Cost: When you make an investment decision, there is often a next best alternative that you decided not to take, such as buying one stock and passing up the opportunity to buy a different one. The difference between the value of the decision you did make and the value of the alternative is the opportunity cost. If you decide to invest in a risky stock hoping to realize a high return, you give up the return you might have earned on a bond or blue chip stock. So if the risky stock fails to perform, and you only make 3% on it when you might have made 6% on a blue chip, then the opportunity cost of the risky investment is 3%. Of course, if your stock pick pays off, there will have been no opportunity cost, because you will make more than the 6% available from the safer investment. Businesses must also consider opportunity costs in their decision-making. If a company is considering a capital investment, it must also consider the return it would earn if, instead of going ahead with the capital project, it invested the same amount of money in some other way. In general, a business will only make a capital investment if the opportunity cost is lower than the projected earnings from the new project.

Other Words for Cost

Cost Noun Synonyms: sell for, get, fetch, bring in, set (someone) back
Cost Verb Synonyms: price, outlay, payment, charge, expense, expenditure, rate, tariff

Other Words for Opportunity

Opportunity Adjective Synonyms: chance, occasion, opening, possibility, moment, time, break

Indirect Management Costs


Infant Formula Cost-Containment

Business / Agriculture / Infant Formula Cost-Containment: Refers to statutory provisions in the Child Nutrition Act of 1966 that require state WIC agencies to solicit bids to infant formula companies for the sale of infant formula used in WIC food packages. MORE

Information Costs

Business / Finance / Information Costs: The rise in the stock price following a dividend signal, or publication of some other related news. MORE