when a firm might use a single hurtle rather than different divisional or business unit rates. When a single rate is used and the divisions within a company are very different in their risk profiles, using a single rate can lead to either an over-investment or an under-investment Using an example, briefly described both of these potential problems.
when a firm might use a single hurtle rather than different divisional or business unit rates. When a single rate is used and the divisions within a company are very different in their risk profiles, using a single rate can lead to either an over-investment or an under-investment Using an example, briefly described both of these potential problems.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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when a firm might use a single hurtle rather than different divisional or business unit rates.
When a single rate is used and the divisions within a company are very different in their risk profiles, using a single rate can lead to either an over-investment or an under-investment Using an example, briefly described both of these potential problems.
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