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Question 4.A.21: How might classification help in this way?

How might classification help in this way?

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The different classes of investment may reflect different levels of risk. Equipment replacement, for example, may be considered to be low-risk and therefore require only a low rate of return. New product development, however, may be considered to be high-risk and so require a high rate of return. (The issue of risk and return in relation to investment proposals is considered in some detail in the following chapter.)

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