Page 1 of 1
We learned that a company's Minimum Attractive Rate of Return or MARR should be determined by choosing the largest of th
Posted: Sun May 08, 2022 9:40 am
by answerhappygod
- We Learned That A Company S Minimum Attractive Rate Of Return Or Marr Should Be Determined By Choosing The Largest Of Th 1 (31.5 KiB) Viewed 35 times
We learned that a company's Minimum Attractive Rate of Return or MARR should be determined by choosing the largest of the cost of borrowed money, cost of capital, or opportunity cost. A company that typically has $1 million to invest in capital projects every year was not able to finance all viable projects they evaluated last year. The first project that was cut last year had a rate of return of 10%. The company has a good banking relationship with a local bank that generally lends them money at an interest rated of 9%. Last year they used the $1 million available for new capital investments to fund only 1 project. That project was funded 20% by a bank loan at 9%, 20% by bonds at 7%, and 60% by selling common stock at 11%. What is the MARR they should choose?