Business Case Study Hint According to the \"Home Office\", a specific value for

Question

Business Case Study Hint According to the "Home Office", a specific value for MARR was intentionally not provided. As you know, MARR is a function of a firm's cost of capital and the influence of the risk inherent to a project- see page 223 of the textbook. Therefore, your team have several opportunities to differentiate itself from the other teams on this basis. These opportunity could include but not limited to 1) Research into the sensor industry's expectations for MAR 2) Using the project risk analysis (Chapter 12), determine an appropriate MARR 3) Assume the "market interest rate" is a good indication of MARR 4) Note net working capital is 20%, which could be another indicator of MARR 5) Or some other approach

Explanation / Answer

MARR stands for Minimum attractive rate of return. Rate of return is a determinant used for valuing he investment decision for any indivdual of corporate return. Also known as the cost of capital for a firm it acts as the benchmark for valuation of projects and its returns. The cost of capital is varied and is different from company to company and firm to firm. It could also be different from project to project basis for a company. A company's cost of capital is an internal data which is normally not available to the public directly however the offer documents for raising money like prospectus etc. are the documents which disclose such kind of entity specific information

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