If the risk-free interest rate is 6%, expected inflation is 3%, and the opportunity cost of capital is 12%, the investment’s net present value (NPV) is closest to:
Definitely the opportunity cost.
NPV discounting uses either
Opportunity Cost
Required Rate of Return
Discount rate
Risk free rate and inflation are simply components of those rates usually.
op cost, always. yeah. also, dont forget that interest costs ARE NOT INCLUDED, because that would be double counting. A firms WACC already accounts for financing things, etc
I saw a question like this last week.
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