Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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How can we compute the true IRR, or RIC, as a function of the MARR?
Expert Solution
Step 1 Introduction
Minimum Acceptable rate of return is the minimum rate which the management wishes to have from any project.
Generally, this is based on the cost of capital. Therefore, this rate can be used as the discount rate or the opportunity cost.
Minimum Acceptable rate of return is also known as Hurdle rate and cut- off rate and it is determined by Weighted average cost of capital and set by the management.
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