Summer self liquidating loan aspx
From an accounting perspective, a sunk cost could also refer to the initial outlay to purchase an expensive piece of heavy equipment, which might be amortized over time, but which is sunk in the sense that you won't be getting it back.
An opportunity cost would be to buy a piece of heavy equipment with an expected return on investment (ROI) of 5% or one with an ROI of 4%.
The opportunity cost of holding the underperforming asset may rise to where the rational investment option is to sell and invest in the more promising investment.
Both options may have expected returns of 5%, but the U. Government backs the rate of return of the T-bill, while there is no such guarantee in the stock market.
While the opportunity cost of either option is 0 percent, the T-bill is the safer bet when you consider the relative risk of each investment.
The company must decide if the expansion made by the leveraging power of debt will generate greater profits than it could make through investments.
Because opportunity cost is a forward-looking calculation, the actual rate of return for both options is unknown.