The hurdle rate is often compared to the internal rate of return for this very reason. Managers can easily tell whether or not to accept a new investment. If the internal rate of return is larger than the hurdle rate, the investment should be accepted. If it isn’t, the investment should...
What is a Hurdle Rate? A hurdle rate is the minimum return that investors are willing to accept on a particular investment that they’ve made. It’s also known as the minimum acceptable rate of return (MARR) and is a calculation that takes into account a number of important financial ...
Hurdle rate explained The definition of hurdle rate is the minimum required rate of return on a financial proposition for it to receive the green light. This hurdle rate concept can be applied to investments and business projects. The greater the risk involved in an investment, the higher the ...
A hurdle rate is the least amount of return that can be generated by a given strategy or product and still be considered to be...
What is the hurdle rate?Interest Rate:From the perspective of investors, the interest rate would refer to the expected return will be captured in the future. From the perspective of borrowers, it is the financing cost that borrowers will have to undertake for use of lenders' funds....
The hurdle rate is also used to discount a project’s future cash flows to itsnet present value. Example of Hurdle Rate The absolute minimum hurdle rate should be the company’scost of capital(a blend of the cost of debt and the cost of equity). However, the hurdle rate is usually lar...
Definition:Discount rate; also called thehurdle rate, cost of capital, or required rate of return; is the expected rate of return for an investment. In other words, this is the interest percentage that a company or investor anticipates receiving over the life of an investment. ...
Hurdle Rate vs. Internal Rate of Return (IRR) Hurdle Rate FAQs The Bottom Line By Will Kenton Updated January 18, 2024 Reviewed by Gordon Scott Fact checked by Pete Rathburn What Is a Hurdle Rate? A hurdle rate is the lowest rate of return a project or investment must achieve before a ...
The country risk immediately raised, and so did the hurdle rates for capital investment projects. In this context, any investment seem to be unacceptable. The discussion in this paper is if there was a Hurdle Rate or not, and we present an estimation for different Industries in June 2004....
High-Water Mark vs. Hurdle Rate Example When used in capital budgeting, a hurdle rate has a slightly different meaning: it is the minimum the company or manager expects to earn when investing in a project. Hurdle rate can also refer to the lowestrate of returnfor an investment to be ...