Discuss IIBA CBAP Exam Topic 3 Question 131

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?

A$331013

BThere is not enough information to know as the risk for Project B has not been quantified.

C$235,987

D$567,000

Suggested Answer: C

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

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27 comments · newest first

Jody 20 hours ago

I think the opportunity cost is $235,987.

Eun 6 days ago

I lean towards B. Need to consider potential losses.

Edna 11 days ago

Opportunity cost is definitely C. No risk involved.

Lorrie 16 days ago

I agree with Luis. Risk complicates it.

Marisha 22 days ago

I feel like A is the clear choice. Simple math.

Luis 27 days ago

But what about the risk? B seems valid too.

Lorenza 1 month ago

I think it's C. Lost value of Project A.

Elmira 1 month ago

I still lean towards B. Without knowing the risk, it's hard to decide.

My 1 month ago

Definitely C. The value of Project A is the clear loss here.

Eugene 2 months ago

I feel like B is valid too. Risk changes everything.

Teddy 2 months ago

I agree with Alex. Opportunity cost is what you lose, so C makes sense.

Eleni 2 months ago

But isn't it B)? We need to know the risk for Project B first.

Ardella 2 months ago

I think it's C) $235,987. That's what they gave up.

Salina 2 months ago

But what if Project B fails? That could change everything!

Charlette 2 months ago

Yep, definitely $235,987. Simple math!

Mireya 3 months ago

Wait, how do we know the risk of Project B? Seems like we need more info.

Glory 3 months ago

Totally agree, Project B's risk makes it tricky though.

Tora 3 months ago

Opportunity cost is $235,987 for Project A.

Nicholle 3 months ago

Not sure if they made the right choice here.

Lettie 3 months ago

Definitely $235,987, no doubt!

Loreta 3 months ago

Wait, how do we know the risk for Project B?

Ciara 4 months ago

I think it’s more complicated than that.

Tracie 4 months ago

Opportunity cost is $235,987, right?

Fernanda 4 months ago

I feel like the opportunity cost is straightforward here, but I wonder if the risk of Project B should affect our decision-making process.

Alana 4 months ago

I'm a bit confused because the risk of Project B might change its value, so maybe we can't determine the opportunity cost without that info?

Tawna 4 months ago

I remember a similar question where we had to calculate opportunity cost, and it was just the value of the next best alternative, so I would lean towards option C.

Malcolm 6 months ago

I think the opportunity cost is the value of Project A, which is $235,987, but I'm not entirely sure if we should consider the risk factor too.

IIBA CBAP Exam - Topic 3 Question 131 Discussion