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Project Management & Agile · Intermediate

Opportunity Cost

The value of the next-best alternative forgone when a choice is made.

Definition

In project selection, opportunity cost is the value of the project not chosen.

Example

Choosing Project A (NPV $90k) over B (NPV $70k) has an opportunity cost of $70k.

Exam tip

The answer is the value of the project not selected, not the difference.

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