1. A firm has multiple divisions of similar nature, yet varying degrees of risk.
ID: 2617799 • Letter: 1
Question
1. A firm has multiple divisions of similar nature, yet varying degrees of risk. To assign required rates of return in the simplest manner possible and yet address the differences among the divisions, the firm should use the ???? approach.
2. Which one of the following factors is the primary consideration when searching for a comparable firm to use in the pure play approach to assigning a discount rate to a proposed project?
firm's location
firm's growth rate
firm's size
firm's experience
firm's operations
firm's location
firm's growth rate
firm's size
firm's experience
firm's operations
Explanation / Answer
A firm has multiple divisions of similar nature, yet varying degrees of risk. To assign required rates of return in the simplest manner possible and yet address the differences among the divisions, the firm should use the
The discounted approach or with the help of NPV or ARR
NPV stands for net present Value and ARR stands for average Rate of Return
ARR is generally means the total Averag of return received on the total amount invested
The factors is the primary consideration when searching for a comparable firm to use in the pure play approach to assigning a discount rate to a proposed project is Firm's operations
with the help of this factor we can analyse easily the average rate of return because in this we have mostl all the same type of customers and suppliers
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