If a company decides to invest $100,000 in a new project instead of using that money to pay off existing debt, what is the opportunity cost of this decision?

Opportunity cost is the value of what you give up when you make a choice. In this case, if the company invests $100,000 in a new project instead of paying off debt, the opportunity cost is the benefits it would have gained from paying off that debt. For example, if the debt had an interest rate of 5%, the company could have saved $5,000 in interest payments. So, the opportunity cost includes not just the interest saved but also any potential profits from the new project that might be less than this amount. Understanding opportunity cost helps the company make better financial decisions by considering all possible outcomes.