A hurdle rate which is also known as minimum acceptable rate of return marr is the minimum required rate of return or target rate that investors are expecting to receive on an investment. So we can calculate hurdle rate as 8 5 13 per year for the projects which are risky and have uncertain cash flows whereas for less risky projects with certain cash flows it is 8 0 5 8 5 per year.
Project Or Divisional Weighted Average Cost Of Capital Wacc Cost Of Capital Financial Strategies Weighted Average
The rate is determined by assessing the cost of capital unlevered cost of capital unlevered cost of capital is the theoretical cost of a company financing itself for implementation of a capital project assuming no debt.
Investment hurdle rate. Disadvantages of a hurdle rate hurdle rates. Popular course in this category. As the hurdle rate is 8 and the expected return on the investment is higher at 11 purchasing the new piece of machinery would be a good investment.
In other words a hurdle rate is minimum return or amount of money a company expects to receive from an investment. All in one financial analyst bundle 250 courses 40 projects. Hurdle rate is a managerial accounting term used to describe the lowest rate of return that is acceptable for an investment.
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