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 ?
If a project is risky, a company will require a high internal rate of return, which is the IRR, that can cover its hurdle rate.
So, over three years (36 months), if the loan proceeds were to be invested in the Philippine stock market, it would probably be difficult to grow the money faster than its effective annual interest rate plus the hurdle rate posed by a 91-day T-bill.
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 Fidelity China Special Situations investment trust, launched in April 2010 and managed by leading fund manager Anthony Bolton, carries a performance fee of 15% of any outperformance of its Net Asset Value (NAV) over the MSCI China Index, plus a hurdle rate of 2%.
However, some CFOs have found the CRC to be valuable when evaluating a major capital commitment, such as the acquisition of another company, in order to increase the hurdle rate, thus increasing the minimum required return on the investment.
The NZSF's impact on the government's balance sheet: the 'hurdle rate'
Raising the Hurdle Rate. 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.
The international expansion for real estate has prompted us to re-examine hurdle rate analysis based on updates to our transparency measurement model.
If the mean difference between the two treatment groups achieves a pre-defined hurdle rate, the trial is judged to be complete.
1: Rate of return required by an investor (see also "Hurdle Rate").