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discuss and critically assess the implications of the board's stipulated minimum return of 18% on...

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Finance

discuss and critically assess the implications of the board's stipulated minimum return of 18% on new projects image

Snow all the steps you take to reach your answer. Total marks: 100. Question 1 You are a management accountant working for Bentleys Tasmania and you report to Robin Allardice, the chief financial officer (CFO). At the last board meeting, it was stipulated that the minimum required return on all projects for the coming year must be 18%. The minutes from the meeting document discussions surrounding the continued intense competition, exchange rates and the general malaise in the economies of Bentleys' key markets as reasons for the 18% minimum return. The minutes also record one director as stating 'The high return of 18% will ensure only the best projects are accepted and enable us to provide the superior returns our shareholders demand of us. Robin Allardice is unhappy with the board's final decision of a minimum return of 18% and has requested that a review be completed of Bentleys's Weighted Average Cost of Capital (WACC). Robin Allardice has stipulated that the CAPM approach be used to estimate Robin Bentleys's cost of equity

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