Hurdle rate

(redirected from Hurdle Rates)
Also found in: Dictionary, Wikipedia.

Hurdle rate

The required return in capital budgeting. For example, if a project has an expected rate of return higher than the hurdle rate, the project may be accepted. Also, the rate of current return an income trust must earn consistently in order for it to be able to maintain distributions at their current level.

Hurdle Rate

In capital budgeting, the required return for a project. That is, when a company is planning its outlays in the medium and long-term, it requires a certain rate of return on projects, because they can be quite expensive and the outlays tie up capital that can be used elsewhere. This required return is called the hurdle rate.
References in periodicals archive ?
75% of the retailers surveyed said they were raising the required hurdle rate for real estate capital remodels and relocates, and a number described how were planning to defer or cancel the projects that did not meet their more stringent internal rates of return guidelines.
Figure VI shows the bandwidth of hurdle rates that still pick 90% of the enterprise value.
The above methodology fits fairly neatly into the modelling problem concerning evaluation of hurdle rates for R&D projects.
Managers employing corporate hurdle rates in their acquisition analysis often are not adequately informed on the basis by which the hurdle rates were established and the underlying assumptions associated with them.
However, it would not be optimal for a financial firm to raise all its hurdle rates by the same amount.
In addition to clearing our hurdle rates, the bid packages for these properties offered investor safeguards, including a management contract that effectively provided a revenue floor; an allowance for renegotiating union and other existing contracts; and provisions for protection against currency fluctuations and for the repatriation of profits.
companies still use hurdle rates of 12% or more to justify capital investments, according to a survey of 612 companies conducted by the Institute of Management Accountants (IMA).
Investments are made under conservative financial guidelines and hurdle rates and are funded with internal cash.
The concepts of Economic Value Added (EVA) and Market Value Added (MVA) are schemes devised to build future stock gains into companies' internal hurdle rates.
Japonica Partners expands its Top Quartile IRR Hurdle Rates with a global stock index alternative.
Comparisons based on an organization's cost of capital (the weighted average cost of debt and equity) tend to be more effective than marginal cost approaches, which fall somewhere between marginal borrowing and hurdle rates.