>>The opportunity cost of issuing a stock certificate is zero, because every option I previously had, I still have, including issuing an additional stock certificate, or making a secondary offering.<<
i do not agree.
choice 1: issue 10 stock options that get exercised for $10 each.
choice 2: place a secondary for 10 stock shares at $10 each.
what is the difference between scenario 1 and scenario 2? everything is the same except scenario 2 generates $100 to the company while secnario 1 doesn not, all else being equal.
that is the opportunity cost. given the two choices, you lose $100 if you select choice 1.
what you do after that is not relevant to determining the opportunity cost of these two choices.
i buy a coke w/ my 50 cents. i lost the opportunity to buy a pepsi and a myriad of other 50 cent options. that was the opportunity cost of buying the coke. that doesn't mean since i can buy a pepsi later that there was no initial opportunity cost, right?
you seem to argue that the company could still issue a secondary for $100 if choice 1 was selected (they could do it for choice 2, also - and if they did then choice 1 still cost $100!).
yes, but they wouldn't need the secondary for $100 if the opportunity cost of choice 1 didn't cost them the $100 they need so badly!
opportunity cost is calculated by taking two courses of action and figuring out what is different. the only financial difference between choice 1 and 2 is $100. ok, there may increased employee incentives that benefit the company and the xerox lease, but that this is a simple example. |
