Why should the required rate of return for a capital budgeting problem be project specific? Doesn't the firm just have to satisfy an overall cost-of-capital requirement?
What will be an ideal response?
The required rate of return for a capital budgeting problem is project specific because the firm is viewed as a portfolio of projects owned by the shareholders. It is the shareholder's perspective that matters, and it is their opportunity cost that gives the required rate of return for a project. The question that the managers should ask is the following: If the shareholders were to receive the cash flows from the project directly, what risk would they associate with the cash flows? Notice that this immediately suggests that the required rate of return should be project specific and that it should reflect the market risk that continues to be present when an investor holds a large, well-diversified portfolio.
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How do some companies evaluate their response time improvement efforts?
What will be an ideal response?
Which of the following is a tactic designed to discourage adaptation to the organization's culture?
A. Orient new employees along with a group of other new employees. B. Provide hurdles that are required to be met prior to organizational membership. C. Provide role models for newcomers. D. Put newcomers through orientation apart from current organizational members. E. Constantly affirm to newcomers that they are to be themselves and that they were chosen for the organization based on who they are.