Asked by Alexsis Oltsher on Jul 04, 2024
Verified
The implicit cost of capital is:
A) the explicit cost of capital that the firm might have used but didn't need to.
B) depreciation.
C) the opportunity cost of the capital used by a business.
D) the cost of human capital.
Implicit Cost
The opportunity costs that arise from using assets, resources, or funds in specific ways rather than the next best alternative.
Capital
The total value of assets owned by an individual or firm—physical assets plus financial assets.
Opportunity Cost
The cost of the next best alternative foregone as the result of making a decision.
- Understand the impact of implicit costs on economic profit.
Verified Answer
CC
Chyna CephasJul 09, 2024
Final Answer :
C
Explanation :
The implicit cost of capital is the opportunity cost of the capital used by a business. It is the return that the investor can earn from the best alternative investment with the same risk as the investment being evaluated.
Learning Objectives
- Understand the impact of implicit costs on economic profit.