If the risk-free interest rate is 6%, expected inflation is 3%, and the opportunity cost of capital is 12%, the investment’s net present value (NPV) is closest to:
Opportunity cost
Definitely the opportunity cost. NPV discounting uses either Opportunity Cost Required Rate of Return Discount rate Risk free rate and inflation are simply components of those rates usually.
op cost, always. yeah. also, dont forget that interest costs ARE NOT INCLUDED, because that would be double counting. A firms WACC already accounts for financing things, etc I saw a question like this last week.