- CFA Exams
- CFA Level I Exam
- Topic 3. Corporate Issuers
- Learning Module 5. Capital Investments and Capital Allocation
- Subject 3. Capital Allocation Principles and Pitfalls
CFA Practice Question
Which of the following is least likely classified as an opportunity cost?
A. The cash flows generated by an old machine that is to be replaced
B. The cash savings related to adopting a new production process
C. The market value of vacant land to be used for a distribution center
Explanation: The cash savings related to adopting a new production process is an incremental cash flow, not an opportunity cost.
User Contributed Comments 2
| User | Comment |
|---|---|
| nmech1984 | why not A? I did not fully get it.. |
| PASSCFAxxx | Regarding A, you have to choose between replacing the old machine and the cash flows it generates. Therefore, it's is an opportunity cost |