Question

When a firm uses retained profits to invest in more energy efficient equipment, an economist would calculate the investing in physical capital. of 01.O typical hurdle rate 02. opportunity cost degree of risk 03. 04. hurdle rate premium Previous ISkip Save &Ne , 2019 aar.30 P torn Standard T MacBook Air

Answer 1

Option 02.

• When a firm uses retained profits to invest in more energy efficient equipment, an economist would calculate the opportunity cost of investing in physical capital.
• Investing in a more energy efficient equipment is a most valuable choice that a firm could make.
• When such a choice is made, the firm has to give up certain other choices. This is termed as opportunity cost.
• Hence the firm's must calculate the opportunity cost of making one choice rather than the other choices.