Harstin Corporation has provided the following data:
-The minimum required rate of return for the past year was:
A) 36%
B) 8%
C) 12%
D) 40%

Question

Harstin Corporation has provided the following data: 
-The minimum required rate of return for the past year was:
A) 36% 
B) 8% 
C) 12% 
D) 40%

Quizplus · Accepted Answer

The minimum required rate of return for the past year can be calculated using the Capital Asset Pricing Model (CAPM), which takes into account the risk-free rate, market risk premium, and a company's beta. Without additional information, we can assume that the risk-free rate was around 2-3% and the market risk premium was around 5-7%. Harstin Corporation's beta is not provided, so we cannot calculate the exact required rate of return. However, based on the given answer choices, 12% seems like the most reasonable estimate for a minimum required rate of return for a moderately risky investment. Options A, D, and (to a lesser extent) B are too high to be realistic for most investments.

Harstin Corporation Has Provided the Following Data