Some examples of opportunity costs that should be included in project analysis are that, skilled employees who are moved from an existing project to the new project causing a loss in the existing project.
Opportunity cost refers to what you have to give up to buy what you want in terms of other goods or services. Opportunity cost is a great tool for project selection in many organizations.
The opportunity cost is the difference between the net value of the path that was chosen and the net value of the best alternative that was not chosen.
There is an example of opportunity cost which should be included in the project analysis. The situation where skilled employees are moved from an existing project to the new project causing a loss in the existing project, should be analyzed.
Hence, the answer was given and explained above.
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Answer:
Your friend says that Company A is doing a great job for shareholders. He says that their ROA is high. You point out that shareholders tend to like debt and the Company A has low debt. Furthermore, ROA is biased towards companies with low debt. You suggest that __ROE______ is a better measure of the job management is doing for shareholders.
Explanation:
Company A's Return on Equity (ROE) is a financial measure that investors use to gauge how their equity investments in the company are generating income. The Return on Assets (ROA) helps the same investors to measure how management is using Company A's assets or resources to generate more income. Company A's ROE is determined by dividing its net income by the equity, while its ROA is determined by dividing its net income by the assets. If the ROE equals the ROA, it shows that there is no leverage (debts) held by Company A.
