The potential benefit given up when selecting one alternative over another is a(n) opportunity cost.
Opportunity costs are the possible advantages that a person, investor, or company forgoes while deciding between two options. Opportunity costs are by definition invisible, making it simple to ignore them. Making smarter decisions requires an understanding of the possible opportunities lost when a company or person selects one investment over another. The difference between the anticipated returns of each alternative is all that needs to be considered when estimating an opportunity cost.
The determination of a company's capital structure involves opportunity cost analysis in a significant way. To pay lenders and shareholders for the risk of their investments, a corporation must incur costs when issuing both debt and equity capital, but each has an opportunity cost as well.
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