Question

Please define how to detrmin Hurdle rate.

Please define how to detrmin Hurdle rate.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

A hurdle rate is the minimum rate of return which is required on a project in which the company is investing.

We can also call it as MARR, Minimum Acceptable Rate of Return.

Most of the organisation use Weighted average cost of capital (WACC), as a hurdle rate for investment evaluation purpose. The formula for WACC is = Cost of equity + Cost of debt (1-Tax rate).

As WACC is the required rate of return which investors demand from the company, so the company also wants the same rate from the investment project.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Define the relationship between hurdle rate and IRR and NPV.
Define the relationship between hurdle rate and IRR and NPV.
Which of the following is a legitimate reason for firms to use a hurdle rate rather...
Which of the following is a legitimate reason for firms to use a hurdle rate rather than an estimated WACC to evaluate projects? Question 9 options: A) To more closely represent true opportunity costs for a firm that has to reject positive-NPV projects due to financial constraints. b) To provide a safety margin in case of estimation error in the WACC. C) Both of the above reasons are valid. D) Firms only use a hurdle rate different from the WACC...
The hurdles to implementing EHR, how you would overcome that hurdle, or if it is invalid.
The hurdles to implementing EHR, how you would overcome that hurdle, or if it is invalid.
How would you define a manager? How would you define an organization? Please cite your sources....
How would you define a manager? How would you define an organization? Please cite your sources. Give an example of a strong manager and an organization that you worked with in the past or presently.
Which of the following is another name for hurdle rate? A. Weighted average cost of capital...
Which of the following is another name for hurdle rate? A. Weighted average cost of capital B) cost of doing business C) NPV D) IRR
Please explain and define osmosis. How does osmosis relate to global warming?
Please explain and define osmosis. How does osmosis relate to global warming?
Please explain and define distillation. How does distillation relate to global warming?
Please explain and define distillation. How does distillation relate to global warming?
(A) Please calculate the Weighted Average Cost of Capital (WACC) for the following company. Assumptions: Risk...
(A) Please calculate the Weighted Average Cost of Capital (WACC) for the following company. Assumptions: Risk free rate = 4.0% Company’s spread = 2.0% Expected return of the market = 9.0% Company Beta = 1.10 Company debt to capitalization ratio = 40% Company tax rate = 30%. (Please be sure to show your calculations.) (B) Please define and explain the Hurdle Rate. (3 points)
Given an initial investment of $10,000, a hurdle rate of 11% and the following cash flows,...
Given an initial investment of $10,000, a hurdle rate of 11% and the following cash flows, find the IRR: Year 1       $2,500 Year 2       $2,500 Year 3       $3,000 Year 4       $3,000 Year 5       $3,500 Based on the IRR in question 8, is it worth the $10,000 investment? Why or why not?
A company's hurdle rate is generally influenced by: Select one: a. whether management uses the net-present-value...
A company's hurdle rate is generally influenced by: Select one: a. whether management uses the net-present-value method or the internal-rate-of-return method. b. project risk. c. Both the cost of capital and project risk. d. the cost of capital. e. the firm's depreciable assets.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT