Smith Corporation has earned a return on capital invested of 10% for t

Smith Corporation has earned a return on capital invested of 10% for the past two years, but an
investment analyst reviewing the company has stated the company is not creating shareholder
value. This may be due to the fact that

A) investors’ required rate of return is 8%.
B) investors’ required rate of return is 12%.
C) the corporation’s inventory turnover is high.
D) the risk-free rate of interest is 3%.

ANSWER

B