Financial modelling terms explained

Required Rate Of Return

The required rate of return (RRR) is the minimum rate of return an investor or a company expects on an investment or project. A higher RRR means the investor or company have a higher risk tolerance, and they are more likely to accept a higher level of risk.

What Is the Required Rate of Return?

The required rate of return, or required rate of return on equity (RRRE), is the rate of return that a company must earn on its equity in order to satisfy its shareholders. The RRRE is also known as the cost of equity, and it is one of the most important inputs into a company's financial model. The RRRE is determined by analyzing a company's risk profile and by estimating the required rate of return that investors require to compensate them for that risk.

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