Register now or log in to join your professional community.
<p>a. Net Benefit related to an alternative course of action, not undertaken.</p> <p>b Net Benefit related to an alternative course of action, undertaken.</p> <p>c Net cost of availing an opportunity.</p>
The correct option is (A)
a is correct
answer A. the benefit forgone by not taking the other alternative
None of the3 options is correct.
Opportunity Cost is defined as the cost in terms of profitability that an individual or Company has lost on account of not undertaking the project or operations. It is thus treated as a Loss and not as a Profit.
I am giving a simple example :
A Company has to make a choice of taking up any1 of the following2 Projects (A & B).
Project A : Has a NPV of Plus1 Million USD over5 years.
Project B : Has a NPV of Plus2 Million USD over5 years.
Due to obvious reasons the Company takes up Project B and sacrifices Project A which may be taken up by another Company.
Thus the Opportunity Cost of the first Company is1 Million USD over5 years.
A- Net Benefit related to an alternative course of action, not undertaken
