PM Test Center

During the project selection stage, you learn that the value of Project A is $100,000 and the value of Project B is $75,000. Ultimately, Project A was chosen. As a result, the opportunity cost of that decision is:

A. $100,000
B. $75,000
C. $25,000
D. $175,000

Answer: B. $75,000
The opportunity cost is simply the value of the project not chosen. There is no math involved.

Megan is working with her finance department to determine depreciation for a warehouse forklift that was purchased. She is told that accelerated depreciation will be used. If the forklift cost $50,000 and Megan wants to spread the depreciation over five years, which of the following will the first year most likely be?

A. $5,000
B. $8,000
C. $10,000
D. $15,000

Answer: D. $15,000
If Megan was asked to use straight line depreciation, then the answer would be $10,000, which is a simple average. For accelerated depreciation, the first year will be higher than the average and incrementally decrease over time. As a result, the first year depreciation could only be $15,000 from this list since it is the only value greater than $10,000.