CFA Practice Question

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CFA Practice Question

Opportunity costs should not be included, as they are missed opportunities. True or False?
Correct Answer: False

User Contributed Comments 4

User Comment
thekapila They are subtracted while detrmining incremental cash flows.
MRSLETS The 'missed opportunity' is a costs to the firm taking a project instead of doing something else with the capital.
johntan1979 It is subtracted, but the reasoning in the question is wrong. It is not a missed opportunity.

It is the cost of any activity measured in terms of the value of the next best alternative forgone (not chosen).
johntan1979 Sorry, to correct previous statement, the reasoning is correct. It is a missed opportunity. The reason why it is FALSE is because it affects incremental cash flow, hence SHOULD be included.
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