The Chevette Company has come to you for help in establishing a minimum desired rate of return to use in the evaluation of a capital project with a 5-year life.
The following data have been provided: Required:
a. What would be an appropriate minimum desired rate of return?
b. What is meant by "risk-free" element?
c. What is meant by "risk" premium?
d. Why is an inflation factor relevant?

Question

The Chevette Company has come to you for help in establishing a minimum desired rate of return to use in the evaluation of a capital project with a 5-year life.
The following data have been provided:  Required:
a. What would be an appropriate minimum desired rate of return?
b. What is meant by "risk-free" element?
c. What is meant by "risk" premium?
d. Why is an inflation factor relevant?

Quizplus · Accepted Answer

The Answer of The Chevette Company has come to you for help in establishing a minimum desired rate of return to use in the evaluation of a capital project with a 5-year life.
The following data have been provided:  Required:
a. What would be an appropriate minimum desired rate of return?
b. What is meant by "risk-free" element?
c. What is meant by "risk" premium?
d. Why is an inflation factor relevant?

The Chevette Company Has Come to You for Help in Establishing