Under the value-to-book model new projects will be less profitable only when: A) ROCE equals ROA B) ROCE equals R_E C) ROCE is greater than R_E D) ROCE is less than R_E

Question

Quizplus · Accepted Answer

According to the value-to-book model, new projects will be less profitable only when the return on capital employed (ROCE) is less than the required rate of return on equity (R_E). Therefore, the best choice is D, where ROCE is less than R_E.

Under the Value-To-Book Model New Projects Will Be Less Profitable