Identify methods that firms use to establish hurdle rates for capital projects
What will be an ideal response?
Firms use many techniques to establish hurdle rates. First, if they have multiple and distinct business divisions, they may use industry averages for that type of business. Or, they may have historical reference points whereby they can estimate risk and use that to establish a required return. Some firms establish risk and a hurdle rate on a project by project basis. Other firms create "risk buckets" with hurdle rates and place projects into the appropriate bucket based on perceived risk.
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Jade, a scientist working in the research department of Corals Cosmetics, is asked to not report the ill-effects of using a new product that Corals has decided to launch. Jade’s boss offers a hike and a permanent job in exchange for skipping a few details in the report. Jade refuses to do this and asks him to withhold the product from entering the market. According to Kohlberg's model of cognitive moral development, Jade resides in the _____ stag
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