Dandy adjusts for divisional by adding or subtracting 2, Ask an Expert

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Dandy Product's overall weighted average required rate of return is 9 percent. Its yogurt division is riskier than average, its fresh produce division has average risk, and its institutional foods division has below-average risk. Dandy adjusts for divisional by adding or subtracting 2 percentage points and project risk by adding or subtracting 4 percentage points. Thus, the maximum adjustment is 2 + 4 percentage points. What is the risk adjusted required rate of return for a low-risk project in the yogurt division?

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