Other

Question

We talked much about investment in lectures. Which of the following best characterizes the

investment decision?

• a. Firms should take investments that make them more profitable

• b. Firms should take investments that earn returns greater than the risk adjusted hurdle

rate

• c. Firms should take investments that earn the highest returns

d. Firms should take investments that generate the most cash flows

Answer

b. Firms should take investments that earn returns greater than the risk adjusted hurdle rate.

Download to view full explanation

The investment decision should be based on the risk-adjusted hurdle rate, which is the rate of return that a firm must earn on an investment in...