The required rate of return is the rate of return that the firm forgoes by investing in a particular project rather than investing in an alternative project of comparable risk.

Question

Quizplus · Accepted Answer

The required rate of return is the minimum rate of return that a company needs to earn on its investment to compensate for the risk taken. It reflects the opportunity cost of investing in a project rather than investing in alternative projects with similar risk profiles. Therefore, the statement is true.

The Required Rate of Return Is the Rate of Return