Asked by Allie Spolsdoff on Jul 16, 2024
Verified
Although economists and accountants treat many costs differently, they both treat the cost of capital the same.
Cost of Capital
The rate of return that a company must earn on its investment projects to maintain its market value and attract funds.
- Appreciate the indispensability of accounting for both explicit and implicit costs in the field of business economics.
- Clarify the distinction between economic and accounting profits by examining the impact of implicit costs.
Verified Answer
JM
Jogging MusicJul 22, 2024
Final Answer :
False
Explanation :
Economists consider opportunity costs, including the cost of capital as the return that could have been earned on the next best alternative investment. Accountants, however, typically focus on explicit costs and do not always account for opportunity costs in the same way, leading to different treatments of the cost of capital.
Learning Objectives
- Appreciate the indispensability of accounting for both explicit and implicit costs in the field of business economics.
- Clarify the distinction between economic and accounting profits by examining the impact of implicit costs.