Graham Industries has two separate divisions: the Farm Equipment Division and the Household Products Division. Each division accounts for about 50 percent of the company’s revenues and assets. Managers now want to enter the toy industry. In assessing the attractiveness of investment projects in the toy industry, Graham should use a required rate of return based on: A. a required return computed for the toy industry. B. the required rate of return on the market portfolio. C. Graham’s current weighted-average cost of capital. D. a weighted-average required return computed for the farm equipment, household products, and toy industries.
The toy industry can be more or less risky than the farm equipment and household division. Therefore I think the required rate of return that is computed for the toy industry. So A.
hey portfolio did you figure out how to use your hand calculator? LOL
Is there an official explanation?