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(1) Out of three explanations, which uses the concept of required rate of return?
- He plans to invest in a project. He wants at least 10% return from the investment.
- He plans to invest in a project. He will get at most 10% return from the investment.
- He plans to invest in a project. He forecasts the return from the investment will be 10%.
(2) Out of three explanations, which uses the concept of internal rate of return?
- If I invest $1 million, I want to get at least 10% return from the investment.
- If I invest $1 million, I estimate to get about 10% return from the investment.
- If I invest $1 million in the project, I estimate to get about 10% return from the investment. Therefore, I will invest in the project.
(3) Which explains the purpose of CAPM (capital asset pricing model)?
- To estimate a companys cost of debt
- To estimate an internal rate of return of an investment opportunity
- To estimate a companys cost of equity
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