Question related to opportunity cost...

Submitted by PMPKID2012 on Sat, 01/28/2012 - 06:44

 Need help ...

Q: An organization has four projects to choose from: Project A with a NPV $45,000, Project B with a NPV $60,000, Project C with a NPV $75,000, Project D with a NPV $30,000. What is the oppurtunity cost of selecting Project C?

A. $60,000

B. $135,000

C. $30,000

D. $45,000

Please help in finding the right answer, and also how should we solve if more than 2 projects scenario is given and asks us to find out the oppurtunity cost.

 

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dalrsmith

Sat, 01/28/2012 - 18:49

It will be "A", which is $60,000.  Opportunity costs is the value foregone because of taking a particular project.  Because of this, you are giving up your next best option, which is $60,000.  Hope this helps.


 


 

PMPKID2012

Sat, 01/28/2012 - 20:42

Thanks, it helps.