Opportunity Cost of Capital

The opportunity cost of capital or "hurdle rate of return" is the return that you will require on your investment in order to justify the investment. It is an opportunity cost because it is the return foregone by investing in some equally risky investment, such as the stock market. Stated in other words, it is the return from the next best investment opportunity. The higher the risk, the greater the opportunity cost of capital.

Click on the Concept Stage in the DecisionCrafter NPD.xls menu. This will take you to the appropriate cells in the Concept Stage. The appropriate data input cells have been reproduced below.

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