Asked by Normaly Valdez on May 14, 2024
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The hurdle rate is often set at:
A) The rate the company could earn if the investment were placed in the bank.
B) The company's cost of capital.
C) 10% above the IRR of current projects.
D) 10% above the ARR of current projects.
E) The rate at which the company is taxed on income.
Hurdle Rate
The minimum rate of return on an investment required by an investor or manager, used to assess its viability.
Cost Of Capital
The rate of return that a business must achieve to meet the expectations of its investors and creditors, representing the opportunity cost of investing capital in a specific business.
IRR
The Internal Rate of Return; a discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.
- Understand the concept of hurdle rates and its application in investment decision-making.
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Learning Objectives
- Understand the concept of hurdle rates and its application in investment decision-making.
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