Question

True or false: Opportunity cost refers to the increase in NPV resulting from a deferral of the receipt of before--tax cash flows.

Answer 1

The statement is false as opportunity cost is not directly related to the increase in NPV resulting from a deferral of before-tax cash flows.

Step-by-step explanation:

The statement is false. Opportunity cost refers to the value of the next best alternative that is forgone when making a choice. It is not directly related to the increase in Net Present Value (NPV) resulting from a deferral of before-tax cash flows. Opportunity cost is about the trade-offs and alternatives that one has to give up in order to obtain something else.