Your organization is trying to determine which one of two opportunities they will pursue. The Project A is worth $235,987 and Project B is worth $567,000 but carries significant risk. The organization elects to purse Project B and not Project A. What is the opportunity cost in this scenario? Opportunity cost is the value of the next best alternative that is forgone as a result of making a decision1. In this scenario, the opportunity cost of choosing Project B over Project A is the value of Project A, which is $235,987. This means that by pursuing Project B, the organization is giving up the potential benefit of earning $235,987 from Project A. The risk of Project B is not relevant for calculating the opportunity cost, as it only affects the expected return of Project B, not the value of Project A. The difference between the values of Project B and Project A ($331,013) is not the opportunity cost, as it does not reflect the value of the forgone alternative.The value of Project B ($567,000) is not the opportunity cost, as it is the value of the chosen alternative, not the forgone one.Reference:1: Opportunity Cost: Definition, Calculation Formula, and Examples1
A. $331013
B. There is not enough information to know as the risk for Project B has not been quantified
C. $235,987
D. $567,000