Challenges with Opportunity Cost
The main challenge with opportunity costs is that they are hard to accurately calculate. Returns on investments are often estimated rather than hard-set figures.
It is also not always easy to define non-monetary factors like risk, time, skills, or effort. This is not to say trade-offs should not be estimated and considered in business decision-making, but rather that it is only after a choice has been made that managers will have the hindsight to see how each investment decision is compared.
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Sunk Costs are explicit and appear on financial statements so it is understandable why these costs are honed in on. Opportunity Costs are implicit and unseen, so they are often overlooked.
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The idea is part of this collection:
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