Analytical Framework for Examining the Value of Antibacterial Products. 5.1.1 Real Opportunity Cost of Capital


As previously discussed (see Sections 3.2.1 and 4.2.1), the real opportunity cost of capital represents the rate of return (net of inflation) that a developer would otherwise be able to earn at the same risk level as the investment in the new rapid POC diagnostic that has been selected.  Based on discussions with industry experts and published studies, we use an 11 percent cost of capital in the model.  Similar to the antibacterial and vaccine analyses, because this parameter value heavily influences private ENPV outcomes, we assign a triangular probability distribution with a lower limit of 9 percent, an upper limit of 24 percent, and a likely point estimate of 11 percent for sensitivity analysis purposes.

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