Chovita Sports Company evaluated a project as a low-risk project. Chovita generally evaluates projects that are less risky than average by adjusting its required rate of return by 2 percent. If Chovita expects 12% return on average risk projects, then it should expect a return of _____ for a less-risky project.
A) 8%
B) 12%
C) 16%
D) 10%
E) 48%

Question

Quizplus · Accepted Answer

Chovita adjusts its required rate of return by 2% for less risky projects. So, the expected return on a less-risky project would be 10%, which is 2% less than the required rate of return for average risk projects (12%). Therefore, the correct answer is D.

Chovita Sports Company Evaluated a Project as a Low-Risk Project