Project Choice and Opportunity Cost
A software company can assign its engineering team to one of two year-long projects.
- Project A (New Product): This project is expected to generate future value equivalent to $1,200,000.
- Project B (Consulting): This project will generate immediate revenue of $1,150,000.
Both projects would incur the same $1,000,000 in engineering salaries for the year.
Based on this information, which project should the company choose? Justify your answer by calculating the net benefit of each project and identifying the opportunity cost of choosing Project A.
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Project Choice and Opportunity Cost