Question

The incremental return on investment that a business foregoes when it elects to use funds for an internal project, rather than investing cash in a marketable security, is called?

Q: Answer-The incremental return on investment that a business foregoes when it elects to use funds for an int...

Opportunity cost of capital is the return or income forgone in investing in a particular project, instead of investing the same sum in government securities. If the projected return on the internal project is less than the expected rate of return on a marketable security, one would not invest in the internal project, assuming that this is the only basis for the decision. The opportunity cost of capital is the difference between the returns on the two projects.