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Topic: Opportunity cost of capital

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	How Much does it cost to develop a new drug
		Allowances for Risk and the Opportunity Cost of Capital Some estimates are based upon the direct costs of drug development, without accounting for the risk of failures, and without adjustments for inflation or the cost of capital.
		In the often quoted 1991 study by Joseph DiMasi and his colleagues, the costs of preclinical expenditures were 67 to 73 percent of the total development costs, depending upon the assumptions regarding the opportunity costs of capital.
		At 14 percent, the cost of capital for preclinical research in the most frequently quoted estimate from the 1993 OTA report, the cost basis increases by 48 percent in 3 years, doubles in 5.3 years and triples in 8.4 years.
	www.cptech.org /ip/health/econ/howmuch.html (1748 words)

	SSRN-Opportunity Cost of Capital for Venture Capital Investors and Entrepreneurs by Frank Kerins, Janet Smith, Richard ...
		Entrepreneurs face the risk-return tradeoff of the CAPM as the opportunity cost of holding a portfolio that necessarily is underdiversified.
		With a 4.0 percent risk-free rate and 6.0 percent market risk premium, for the sample average observation, the cost of capital of a well-diversified investor is estimated to be 11.4 percent, or 16.7 percent before the management fees and carried interest of a typical venture capital fund.
		The corresponding cost of capital for an entrepreneur with 25 percent of total wealth invested in the venture is estimated to be 40.0 percent.
	papers.ssrn.com /sol3/papers.cfm?abstract_id=379961 (456 words)

	Online Tutorial #8: How Do You Calculate A Company's Cost of Capital?
		The cost of debt capital is equivalent to actual or imputed interest rate on the company's debt, adjusted for the tax-deductibility of interest expenses.
		Thus, we infer the opportunity cost of equity capital.
		A company's marginal cost of long-term debt may be better estimated by summing the risk-free rate and the "credit spread" that lenders would charge a company with a specific credit rating.
	www.expectationsinvesting.com /tutorial8.shtml (1594 words)

	Boston University - MSIM (Site not responding. Last check: 2007-11-01)
		Profit (in economic terms) means that the rates of return from investment projects should be higher than the opportunity cost for capital employed in projects.
		Stockholders and creditors provide equity and debt capital to corporations, and in turn, they expect to receive a return that is appropriate with the level of risk they are taking.
		Thus, there is an explicit relationship between investment projects and their opportunity cost of capital.The cost of capital is the discount factor used in a project's evaluation, which we will discuss throughout this weeks' lessons.
	people.bu.edu /bozorg/METFI631_W5_L1_T3_S1.html (194 words)

	Opportunity Cost (Site not responding. Last check: 2007-11-01)
		The return she could have gotten on another investment is the opportunity cost of her own funds invested in the business.
		This is an implicit cost, and in this case the implicit cost is part of the cost of capital and probably a fixed cost.
		This capital has an opportunity cost, and that opportunity cost is an implicit cost.
	william-king.www.drexel.edu /top/prin/txt/Cost/cost3.html (525 words)

	[Ip-health] Reporting $802: Opportunity cost of capital as a drug development cost
		Opportunity cost of capital as a drug development cost The least understood component of the Tufts study on drug development costs concerns the "opportunity cost of capital," an imputed cost that the Tufts researchers included to account for the costs of financing RandD investments.
		The inclusion of financing costs is similar to including interest payments on car loan when estimating the costs of a car purchase, except that the researchers have a lot of latitude in picking the relevant interest rate for investment costs.
		The fact that the financing costs in the latest report runs just over 50 percent suggests that either the discount rate is close to 9 percent, or that the Tufts researchers included a much larger component for clinical costs, which require less financing (than pre-clinical costs).
	lists.essential.org /pipermail/ip-health/2001-December/002494.html (1246 words)

	WACC - Weighted Average Cost of Capital
		WACC (Weighted Average Cost of Capital) is an expression of this cost and is used to see if certain intended investments or strategies or projects or purchases are worthwhile to undertake.
		The cost of capital for any investment, whether for an entire company or for a project, is the rate of return capital providers would expect to receive if they would invest their capital elsewhere.
		Normally, the cost of equity finance is higher than the cost debt finance, because the cost of equity involves a risk premium.
	www.valuebasedmanagement.net /methods_wacc.html (388 words)

	MTW44.HTM, COSTS: Fixed, Variable, Direct, Indirect, Incremental, Marginal, Sunk
		The opportunity cost of Capital is not a constant.
		Fixed costs are at any time the inevitable costs that must be paid regardless of the level of output and of the resources used.
		In effect opportunity costs, in representing the cost of having less of a resource, measure the rate of change of benefits per unit change in resource.
	www.unb.ca /transpo/mynet/mtw44.htm (858 words)

	[No title] (Site not responding. Last check: 2007-11-01)
		The opportunity cost of capital is based on the risk of the cash flows (higher risk, higher opportunity cost of capital) Notice that the above example gives project cash flows and probabilities.
		In general, to calculate the opportunity cost of capital for a risky cash flow, you must determine (A) its risk, and (B) the expected return for financial assets that have that exact same amount of risk.
		NPVA = -$100 + $120 / (1 + opportunity cost of capital for project A) NPVB = -$100 + $93.2 / (1 + opportunity cost of capital for project B) As stated above, the opportunity cost of capital depends on the riskiness of the projects.
	www.uky.edu /~jcooney/fin445/notes/Chap7-8.doc (2395 words)

	SSRN-New Venture Opportunity Cost of Capital and Financial Contracting by Frank Kerins, Janet Smith, Richard Smith
		We develop theory and evidence related to opportunity cost of capital for venture capital investors and entrepreneurs.
		With the Capital Asset Pricing Model as an approximation of the model used by well-diversified investors, the entrepreneur faces the risk-return tradeoff of the CAPM as the opportunity cost of underdiversification.
		We model opportunity cost, assuming investment in the venture is one of two assets in the entrepreneur's portfolio and the other is the market portfolio.
	www.ssrn.com /abstract=273882 (389 words)

	Cost Opportunity - Best money-making options available today (Site not responding. Last check: 2007-11-01)
		Encyclopedia Encyclopedia Opportunity cost Opportunity cost is a term used in economics, to mean the cost of something in terms of an opportunity foregone (and...
		Opportunity cost economics, to mean the cost of something in terms of an opportunity foregone (and the benefits that could be received from that opportunity), or the most valuable forgone alternative...
		Opportunity cost The cost of an item may be expressed in financial terms; e.g.
	www.rsopportunity.com /costopportunity (1319 words)

	Financial Models in Operations (Site not responding. Last check: 2007-11-01)
		Third, comparison with the cost minimization model which uses a fixed opportunity cost of capital shows that large penalties in cost can result if the opportunity cost of capital is not adjusted for the risk of the cash flows from inventory decisions.
		The business risk, and hence the opportunity cost of capital for inventory investments, is an increasing function of the inventory parameters.
		The opportunity cost of capital is a decreasing function of variable profit per unit.
	www.cba.uc.edu /FACULTY/RATURIAS/finpapers.html (320 words)

	ecofine - The opportunity cost of capital (OCC)
		The OCC is the expected return that your are giving up by investing in a project rather than in the stock market.
		In other words, it is the project's opportunity cost of capital.
		Estimate the Opportunity Cost of Capital (OCC) :
	www.ecofine.com /strategy/occ.htm (137 words)

	ecofine - The Weighted Cost of Capital (WACC)
		The true OCC depends on the use of capital.
		If a firm uses the company cost of capital rule, it would reject many good low-risk projects and accept many poor high-risk projects.
		The Cost of capital is the norm to be respected for capital budgeting decisions.
	www.ecofine.com /strategy/wacc.htm (424 words)

	SSRN-New Venture Opportunity Cost of Capital and Financial Contracting by Frank Kerins, Janet Smith, Richard Smith
		We develop theory and evidence related to opportunity cost of capital for venture capital investors and entrepreneurs.
		With the Capital Asset Pricing Model as an approximation of the model used by well-diversified investors, the entrepreneur faces the risk-return tradeoff of the CAPM as the opportunity cost of underdiversification.
		We model opportunity cost, assuming investment in the venture is one of two assets in the entrepreneur's portfolio and the other is the market portfolio.
	papers.ssrn.com /sol3/papers.cfm?abstract_id=273882 (380 words)

	[No title]
		This chapter is the first of the three chapters, which deal with the risk and return trade-off, and its implications to incorporate finance and the opportunity cost of capital for investments.
		Use of historic returns: Historic data are often used for valuation or cost of capital estimation.
		If the capital market establishes a value PV (A) for asset A and PV (B) for asset B, the market value of a firm that holds only these two assets is: PV (AB) = PV (A) + PV (B) This is known as the value-additivity principle.
	userpage.fu-berlin.de /~ballou/myers/guides/chapt07.doc (3179 words)

	[No title]
		The true opportunity cost of the land is what you could sell it for, i.e., $58,037 (or $57,273).
		The cost of capital is an opportunity cost; it is the rate of return foregone on the next best alternative investment of equal risk.
		As long as capital markets do their job, all members of the community, wealthy or poor, have the same rate of time preference, because they all adjust to the same borrowing-lending line.
	userpage.fu-berlin.de /~ballou/myers/solutions/ch02.doc (2535 words)

	Economic Analysis of Projects - Appendix 20: Estimating the Economic Opportunity Cost of Capital - ADB.org
		The opportunity cost of funds used by the project is therefore the weighted average of the foregone marginal product of the displaced investment and the value of the foregone consumption.
		The estimation of the EOCK is closely linked to the capital market, which allows the injection into, or sourcing of, funds from the rest of the economy.
		The marginal cost that is relevant is given by the sum of the cost of borrowing of the additional unit and the extra financial burden on all other borrowings that are responsive to the market interest rate.
	www.adb.org /Documents/Guidelines/Eco_Analysis/appendix20.asp (1562 words)

	Present Value and the Opportunity Cost of Capital
		Present Value and the Opportunity Cost of Capital
		NPV gives the effective net benefit or value of an investment, and is obtained by subtracting the costs of the investment from the present value of the cash flows generated by the investment.
		Opportunity cost represents the rate of return on investments of comparable risk.
	highered.mcgraw-hill.com /sites/0072467665/student_view0/chapter2 (272 words)

	Equal Employment Opportunity Benchmarking Association
		Equal Employment Opportunity Benchmarking Association™ is dedicated to the analysis and improvement of business processes in the area of equal employment opportunity.
		EEOBA™ will identify and present to members opportunities to participate in Benchmarking studies on various topics addressing issues of importance in the area of equal employment opportunities.
		Costs of studies are shared by the participants.
	www.eeoba.com (638 words)

	Boats for sale Spain, Used boat sales, Motor Boats For Sale Aquador 32 C - Apollo Duck
		Such a "piece of luxury" owned outright (100%) will cost the owner the initial capital investment plus opportunity cost if paid for the boat in cash or interest paid if the boat is financed.
		Opportunity cost is the amount of interest you would have received if you would not have bought a boat but invested the money in a fixed term deposit instead.
		With the initial capital investment being around the 300,000 mark or even higher, the investment is huge and the opportunity cost/interest alone amounts to approximately 20,000 per year.
	es.apolloduck.com /feature.phtml?id=59066 (2014 words)

	Opportunity Cost
		When you make a decision, the most valuable alternative you give up is your OPPORTUNITY COST
		If he chooses the basketball, his opportunity cost is the football.
		Remember, the money you pay for a good or service is not your opportunity cost.
	www.kidseconbooks.com /html/opportunity_cost.html (157 words)

	[No title]
		In many situations, constant expected real cost is a more reasonable assumption.
		One can then compare equivalent real annual costs.¡6ÀHó-¨Summary¨CFor a private target, an acquisition is evaluated using the same method as any capital budgeting project.
		For a public target, the current stock price can be taken to reflect the value of the firm under current management.
	www.cob.ohio-state.edu /~persons_1/828/Investment.ppt (447 words)

	Spartanburg SC \| GoUpstate.com \| Spartanburg Herald-Journal
		The opportunity cost of capital is the expected return forgone by bypassing of other potential investment activities for a given capital.
		It is a rate of return that investors could earn in financial markets.
		Don't get the Herald-Journal delivered to your home?
	www.goupstate.com /apps/pbcs.dll/section?category=NEWS&template=wiki&text=opportunity_cost_of_capital (52 words)

	[No title]
		7(fÿÌþ(fÿÌþ(fÿÌþó?¨Opportunity Cost of Capital¨Example The company may invest $100,000 today.
		Depending on the state of the economy, they may get one of three possible cash payoffs:¡6óh0¨Opportunity Cost of Capital¨©Example - continued The stock is trading for $95.65.
		The investment will generate $2,000 and $4,000 in cash flows for two years, respectively.
	mywebpages.comcast.net /profguy/cft1.ppt (651 words)

	Energy Citations Database (ECD) - Energy and Energy-Related Bibliographic Citations
		Energy Citations Database (ECD) Document #5024615 - Social opportunity cost of capital: empirical estimates
		Availability information may be found in the Availability, Publisher, Research Organization, Resource Relation and/or Author (affiliation information) fields and/or via the "Full-text Availability" link.
		For a journal article, please see the Resource Relation field.
	www.osti.gov /energycitations/product.biblio.jsp?osti_id=5024615 (112 words)

	Accounting.Com: Opportunity cost of capital (Site not responding. Last check: 2007-11-01)
		What is the equivalent annual cost for a project that requires a $40,000 investment at time-period zero, and a $10,000 annual expense during each of the next 4 years, if the opportunity cost of capital is 10%?
		Here is a table using Excel's net present value function.
		You cannot vote in polls in this forum
	www.accounting.com /forum2/forum_posts.asp?TID=2095 (170 words)

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