An organization has two different solutions to grow its business. One project is worth $375,000 to the organization. The second project is worth $565,000 to the business. The organization can only…

The correct answer is C. $375,000. According to the BABOK® Guide, opportunity cost is the value of the next best alternative that is forgone as a result of making a decision. In this case, the opportunity cost of choosing the second project for $565,000 is the value of the first project that is not chosen, which…

Strategy Analysis

Question

An organization has two different solutions to grow its business. One project is worth $375,000 to the organization. The second project is worth $565,000 to the business. The organization can only do one of the projects and elects to do the second project for $565,000. What is the opportunity cost of this decision?

Options

A$190,000
B$565,000
C$375,000
D$940,000

How the community answered

(19 responses)

A
11% (2)
C
84% (16)
D
5% (1)

Explanation

According to the BABOK® Guide, opportunity cost is the value of the next best alternative that is forgone as a result of making a decision. In this case, the opportunity cost of choosing the second project for $565,000 is the value of the first project that is not chosen, which is $375,000. This means that the organization is giving up the potential benefit of $375,000 by selecting the second project over the first one.

Topics

#opportunity cost#decision analysis#solution selection#financial analysis

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