term used in capital budgeting. Hurdle rate is the required rate of returnon a long-term investment opportunity. A proposal would be accepted when the expected rate of return exceeds the hurdle rate. The hurdle rate should equal the incremental cost of capital.
- capital budgeting term referring to a bank's minimal rate of return in extending a loan or making an investment. Loans are funded if the bank's expected return exceeds the hurdle rate. Also called the marginalcost of funds.
- break-even yield; the point at which sales equals cost.
budgeting capital expenditures, the required rate of return in a discounted cash flow analysis. If the expected rate of return on an investment is below the hurdle rate, the project is not undertaken. The hurdle rate should be equal to the marginal cost of capital.
term used in the budgeting of capital expenditures, meaning the required rate of return in a discounted cash flow analysis. If the Expected Rate of Return on an investment is below the hurdle rate, the project is not undertaken. The hurdle rate should be equal to the incremental cost of capital.
