If the capital market is competitive, the user cost of capital equals:
A) the rental rate of capital.
B) the return in that market.
C) the rate of return of investing elsewhere.
D) all of the above.

Question

Quizplus · Accepted Answer

In a competitive capital market, the user cost of capital reflects the opportunity cost of investing capital in one investment over another. This includes the rental rate of capital (the cost of using the capital), the return in that market (what you earn from the investment), and the rate of return of investing elsewhere (opportunity cost). Therefore, all of the options are correct.

If the Capital Market Is Competitive, the User Cost of Capital