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Chovita Sports Company Is Evaluating a Project That Has Lower-Than-Average

Question 21

Multiple Choice

Chovita Sports Company is evaluating a project that has lower-than-average risk. When evaluating projects that have different risks than its existing assets, Chovita normally adjusts its average required rate of return, which is 12 percent, by 2 percent. What required rate of return should Chovita use to compute the net present value (NPV) of the project it is currently evaluating?


A) 14%
B) 12%
C) 6%
D) 10%
E) 24%

Correct Answer:

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