Hurdle rate


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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 ?
element-invisibleBusiness ( Article MRec ), pagematch: 1, sectionmatch: 1"It seems viable The main criterion for economic evaluation is that it passes the hurdle rate," he said.
The report highlights that corporate banks will need to adopt a segment-specific approach to setting target returns in order to create incentives aligned with equity investors' interests, as all segments cannot be measured against one single target ROE hurdle rate.
The hurdle rate determines at which level profit-sharing will take place.
The fact that Fidelity has said if the fund underperforms the hurdle rate in any year, this underperformance must be made good before any further performance fee becomes payable, makes this fund's charging structure fairer for the investor than many in the market.
In order for the government to justify the existence of the NZSF as part of its overall activities in the 2009/10 financial year, the NZSF's Guardians must achieve at least that hurdle rate of 6.
Only 25% of the retailers said they were working to take advantage of real estate deals that were becoming available to increase market share, while more than 80% of the 60% are undertaking a review of their portfolios are slowing down new store openings and/or remodels especially if the new hurdle rates are not being met.
The required rate of return then is the relevant hurdle rate under centralization.
The type of hurdle rate was manipulated (no hurdle rate, organization-set hurdle rate, and self-set hurdle rate) as a between-subjects factor and the dependent variable measured the extent to which subjects wished to either terminate or continue a project.
Equivalently, the firm may compute NPV using a hurdle rate that is sufficiently higher than the cost of capital and take only those projects that have a positive NPV computed using the hurdle rate.
The standard practice is to use a flat hurdle rate, across all the stages of a project.
Those units, Johnson says, bring in more than $1 billion in sales every year but do not meet Albertson's defined return on invested capital hurdle rate.
When using a productivity model for employed physicians, I recommend setting a hurdle rate above a predetermined target of collections to be achieved, before a productivity bonus is received.