Pinder Ltd has a weighted average cost of capital of 20% p.a. and is currently assessing two new projects for investment. You are an analyst and have estimated that an investment in Project A is expected to return 5% p.a. and Project B is expected to return 22% p.a. You then estimate the required rate of return given the risk profile of each of the two projects as follows:

 

Required:

 Return from project A 7% p.a.

Return from project B 25% p.a.

Answer rating: 100% (QA)

Based on the estimated required rate of return given the risk profile of each project it appears tha... View the full answer