Social Games Ltd. has a business value of $50 million, capital invested of $32 million, and annually generates returns that exceed investors required returns by $4 million. What is the percentage required return demanded by investors?

Question

Quizplus · Accepted Answer

The required return is the return that investors expect to earn on their investment. It is calculated by dividing the excess return by the capital invested. In this case, the excess return is $4 million and the capital invested is $32 million, so the required return is $4 million / $32 million = 12.5%.