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Question 260 - CCBA discussion

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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?

A.
$190,000
Answers
A.
$190,000
B.
$565,000
Answers
B.
$565,000
C.
$375,000
Answers
C.
$375,000
D.
$940,000
Answers
D.
$940,000
Suggested answer: C

Explanation:

The opportunity cost is the whole amount of the opportunity that can be seized. In this instance, the opportunity cost is $375,000, as this is the project that the organization can't do.

Answer B is incorrect. This answer is the value of the project the organization has elected to do.

Answer A is incorrect. $190,000 is the difference between the two projects and does not reflect the opportunity cost.

Answer D is incorrect. This is the value of both projects combined and does not represent the opportunity cost.

asked 18/09/2024
Michael Aragon
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