Hurdle rate for low-risk project in frozen foods division

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Reference no: EM13933559

1) Tropicali’s overall average cost of capital is 10%. Its frozen foods division is riskier than the firm as a whole, its fresh produce division has risk similar to the firm’s, and its institutional foods division has less risk. Tropicali adjusts for both divisional and project risk by adding/subtracting 2 percentage points to/from its corporate cost of capital. The hurdle rate for a low-risk project in the frozen foods division is:

a. 6%.

b. 8%.

c. 10%.

d. 12%.

e. 14%.

Reference no: EM13933559

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