Interest foregone on financial capital invested in a firm represents an economic cost

A) only if the firm borrows to finance capital investments.
B) only when the funds are used to buy machinery.
C) because funds invested in the firm could be earning interest elsewhere.
D) because accountants have traditionally input an interest cost for this item.

Economic Cost

The total cost of choosing one action over another, including both the costs incurred and the opportunity costs of forgone alternatives.

Financial Capital

Refers to the funds provided by lenders (and investors) to businesses to purchase real capital.

Machinery

Equipment and devices that perform specific tasks in industries, contributing to production processes.