Question

Fill in the blank question. Based on the average return rule, a project is acceptable if its average return exceeds a target average return of ______.

a) Zero
b) The market rate
c) The cost of capital
d) The risk-free rate

Answer 1

The target average return for a project to be acceptable is the cost of capital.

Step-by-step explanation:

The average return rule states that a project is acceptable if its average return exceeds a target average return. In this case, the target average return is the cost of capital, which is the rate of return required by investors to compensate for the risk of the investment. Therefore, the answer is c) The cost of capital.