Appreciating Capital
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Major Capital Purchase
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Opportunity Cost
Savings / Capital
What remains invested after paying cash
BASIS
GAIN
Major Capital Purchase
A cash-funded asset declining in value
Purchase Price
CURRENT VALUE $0
Depreciating at 12.0%
Opportunity Cost
What the cash used for the purchase could have become
CAPITAL
FOREGONE GAIN
Capital Outcome — Primary Result
Which Strategy Leaves More Capital?
Pay Cash
$0
Capital remaining after the cash purchase.
Other People's Money
$0
Capital remaining under the financing strategy.
Capital Difference$0
Financing Cost Comparison
Foregone Growth — Pay Cash
$0
Growth the purchase capital could have earned.
Loan Interest — OPM
$0
Cumulative interest paid through the selected year.
Why the Capital Difference?
Foregone Growth — Pay Cash$0
Less: Loan Interest — OPM−$0
Less: Lost Growth on Loan Payments — OPM−$0
OPM Capital Advantage$0
This reconciles the financing effects to the actual capital outcome.
Investment Return: 0%
−
Loan Rate: 0%
=
Rate Spread: 0%
Move the timeline to compare the cost of using your capital with the cost of using borrowed money.
Capital Used
$50,000
Capital redirected from savings into the purchase.
Current Asset Value
$50,000
Estimated value of the major capital purchase today.
Opportunity Cost
$0
Foregone growth.
On purchase day, $50,000 leaves an appreciating account and becomes a $50,000 asset. The opportunity cost begins today.