What is the opportunity cost of capital

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Question - Investing $120,000 in raw inventory today, mostly in higher quality carbon fibre should allow Bob's Golf Clubs to increase production and earn an additional $140,400 next year. This payoff would cover the investment today, plus a 17% return. Bob's trades on the S&P/TSX. They are currently able to borrow money at 10%, and are receiving 1% on their cash balances. The CEO has studied the history of returns on investments in carbon fibre and believes that investors in this commodity can reasonably expect a 12% return. What is the opportunity cost of capital and does that make Bob's Golf Clubs' investment a good idea under the circumstances?

Reference no: EM132992435

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