Finance professionals routinely calculate the required rate of return for purchasing new equipment, new product rollouts and potential mergers. For instance, someone requiring a higher rate of return would necessarily have to look at riskier investments. The required rate of return drives the type of investments that can be made. When calculating the required rate of return, investors look at overall market returns, risk-free rate of return, volatility of the stock and overall project cost. ![]() Definition: Required Rate of return is the minimum acceptable return on investment sought by individuals or companies considering an investment opportunity.ĭescription: Investors across the world use the required rate of return to calculate the minimum return they would accept on an investment, after taking into consideration all available options.
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