What is the difference between a required rate of return and an expected rate of return?

The required rate of return represents the minimum return that must be received for an investment option to be considered. Expected return, on the other hand, is the return that the investor thinks they can generate if the investment is made.

What is the difference between the corporate cost of capital and a project cost of capital?

A company’s cost of capital is the rate of return the company would earn if it invested its capital in a company of equivalent risk. The project cost of capital is the required rate of return, or hurdle rate, for the project.

What is required rate of return?

The required rate of return (RRR) is the minimum amount of profit (return) an investor will seek or receive for assuming the risk of investing in a stock or another type of security. The greater the return, the greater the level of risk. A lesser return generally means that there is less risk.

What is the difference between cost of capital and required rate of return?

The cost of capital refers to the expected returns on the securities issued by a company. The required rate of return is the return premium required on investments to justify the risk taken by the investor.

What is required return on equity?

The required rate of return for equity is the return a business requires on a project financed with internal funds rather than debt. The required rate of return for equity represents the theoretical return an investor requires for holding the firm’s stock.

What is the difference between return on and return of capital?

The tax in case of return of capital is to be paid only on the capital gain the investor has realised through the transaction. Thus, return of capital is not taxed, while only return on capital is taxable. For example: A person has invested Rs. 100 is taxed as capital gains to the investor.

Is required rate of return the same as cost of capital?

Is required rate of return the same as interest rate?

The rate of return is an internal measure of the return on money invested in a project. The interest rate is the external rate at which money can be borrowed from lenders.

Is required rate of return the same as discount rate?

The discounted rate of return – also called the discount rate and unrelated to the above definition – is the expected rate of return for an investment. Also known as the cost of capital or required rate of return, it estimates current value of an investment or business based on its expected future cash flow.

What do you understand by required return on receivables?

The required rate of return is the minimum return an investor will accept for owning a company’s stock, to compensate them for a given level of risk.