I was reading a book called "Pitch the Perfect Investment" and I reached a table of data I did not understand (attached below). Can anyone explain why cost of capital is not tallied for the first year? That part doesn't make much sense to me, as I would imagine that there is an opportunity cost of choosing this investment in the first year too.

Picture of Table.

1 Answer 1


Actually it is taken into account. The capital charge for Year 1 is the 5$ shown under Year 2 (60 * 8.5%), for Year 2 is the 11$ (126 * 8.5%) and so on. Hope this makes sense.

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