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Opportunity Cost Quiz

If the depreciation amount is $100,000 and the marginal tax rate is 30%, then the tax shield due to depreciation is:

The projects have the following NPVs and project lives. 
ProjectNPVLife
Project A$5,0004 years
Project B$7,0007 years
If the cost of capital is 12%, which project would you accept?
 

Opportunity costs should not be included as they are missed opportunities.

Do not forget to include interest and dividend payments when calculating the project's cash flow.

An investment should be postponed as long as the opportunity cost of capital is less than the growth rate of the value of the project.

Tagged as: opportunity cost, opportunity cost, project
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