RAH Inc. ,an Australian corporation,is evaluating a proposal to construct and lease an office building in Kiev.RAH's weighted average cost of capital is 11%.The risk free rate in Australia is 3.75%.RAH believes that conditions in Kiev warrant a required rate of return that is 12% above the risk-free rate.Cash flows from the hotel project should be discounted at

Question

Quizplus · Accepted Answer

RAH believes that the required rate of return for the project is 12% above the risk-free rate in Australia, which is 3.75%. Therefore, the required rate of return for the project is 3.75% + 12% = 15.75%. This is the rate at which the cash flows from the project should be discounted to determine the present value of the project.

RAH Inc ,An Australian Corporation,is Evaluating a Proposal to Construct and and Lease