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<p><strong><span>(a) Average Return on Investment,</span></strong></p> <p><strong><span> (b)Weighted Average Cost of Capital,</span></strong></p> <p><strong><span> (c) Net Profit Ratio, </span></strong></p> <p><strong><span>(d) Average Cost of borrowing.</span></strong></p>
The answer is B (Loosely defined)
It's not entirely accurate but, loosely speaking a company must at least earn back its Weighted Average Cost of Capital (WACC)
Usually the measure would be the Expected Rate of Return, which is calculated through the Capital Asset Pricing Model (CAPM) , which is the sum of the Risk Free Rate and a Risk Premium.
R = Rf + B (RM - RF)
Where:
R = Expected Rate of Return
RF = Risk Free Rate
B = Beta Coefficient (Volatility or Systematic Risk of a Security or Portfolio)
RM = Market Return
Generally speaking, a solid investment is one that generates the highest returns when compared to investments carrying the same degree of risk.
answer b
The rate of return on investment : any rate of return that can be earned by an investor if he invested his money in the project and must not be less than the prevailing interest rate in the market
(b)Weighted Average Cost of Capital,
Option-B.
The correct option is (b)
The current option is B) Weighted Average Cost of Capital
WWW: To get information on a specific company, you might want to check the annual report (www.reportgallery.com) and the10-K report (www.sec.gov/edgarhp.htm). The inputs for estimating the market value of debt and equity should be available in these sources. You can get a beta from the daily stocks web site (www.dailystocks.com). To get an extensive risk profile of a firm, visit the web site maintained by www.riskview.com. What more information, such as data on analyst coverage and views of the stock? Try Zacks Investment Research (www.zachs.com). There are many other web sites on the Internet with a wealth of information. www.yahoo.com is just one place to start searching for company info.
The cost of capital is the required rate of return that a firm must achieve in order to cover the cost of generating funds in the marketplace. Based on their evaluations of the riskiness of each firm, investors will supply new funds to a firm only if it pays them the required rate of return to compensate them for taking the risk of investing in the firm’s bonds and stocks. If, indeed, the cost of capital is the required rate of return that the firm must pay to generate funds, it becomes a guideline for measuring the profitabilities of different investments. When there are differences in the degree of risk between the firm and its divisions, a risk-adjusted discount-rate approach should be used to determine their profitability.
B
the answer is B "Weighted Average Cost of Capital"
The WACC is the minimum return that a company must earn on an existing asset base to satisfy its creditors, owners, and other providers of capital, or they will invest elsewhere
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