What do you do with Opportunity costs while calculating the Net - ProProfs Discuss
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What do you do with Opportunity costs while calculating the Net Present Value(NPV) for a specific project?

Asked by Reagan, Last updated: Sep 19, 2022

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John Smith

John Smith

John Smith
John Smith

Answered Sep 08, 2016

You have to include the opportunity costs-opportunity costs relevant to the cash flows of the projectsuppose you are to invest in a new project, a small production unit with 4 weaving looms. youwould also need to have a piece of land where the machinery would be installed. supposefurther, that you already have that piece of land. while calculating the npv for the project, youwould have to include the value of the land that you are using. although you are not buying thatland, but that land has a certain market value. you could have sold that land at the market priceand by not doing so you are incurring an opportunity cost.
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