duration. Project B has an IRR of 16% and an NPV of $118,000 for a 4 year

duration. What is the opportunity cost, if you select project A instead of project B?

A.) -100,000

B.) 118,000

C.) 100,000

D.) 109,000

 

Answer is : B

When selecting between two options (or projects) then the opportunity cost is simply the value of the option (or project) that was not selected. In this case, we

selected project A over project B. This means that our opportunity cost = the value of project B = $118,000. The IRR and duration of the projects are irrelevant.

 

Thanks,

RP, PMP