A company is considering an investment in a project with an expected return of 15% per year.
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Question:
A company is considering an investment in a project with an expected return of 15% per year. The company uses a required rate of return of 12% to evaluate investments.
Instructions: Calculate the project's expected return using the formula expected return = (1 + expected rate of return) / (1 + required rate of return) - 1, and determine if the investment is attractive or not.
Related Book For
Valuation The Art and Science of Corporate Investment Decisions
ISBN: 978-0133479522
3rd edition
Authors: Sheridan Titman, John D. Martin
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