Opportunity cost
Submitted by rsang on Wed, 07/13/2011 - 06:17
Guys,
We all know what opportunity cost is, now I have a question.
Project A: NPV 100
Project B: NPV 200
Project C: NPV 500
Project C would be selected at what opportunity cost, 200 or 300 ?
(Only at cost of project B, or sum of A+B ?)
Forums:
rishabhjain23
Wed, 07/13/2011 - 07:10
Permalink
" I think" it should be 300
" I think" it should be 300 as this is what company looses while selecting project C.
rsang
Wed, 07/13/2011 - 08:24
Permalink
I doubt
I doubt becoz the defination says,
"relative cost of one alternative in terms of the next-best alternative"
any more thoughts?
aaron
Wed, 07/13/2011 - 20:42
Permalink
The organization can select
The organization can select only one project at a time so the opportunity cost (lost value) should be considered only for next best alternative. The answer should be 200.
rsang
Thu, 07/14/2011 - 08:25
Permalink
Thanks!
Thanks!