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.

Mentioned in ?

Weighted average cost of capital

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.

SMC's Bulacan airport proposal remains viable

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.

BCG: GCC corporate banking at peak levels

The hurdle rate determines at which level profit-sharing will take place.

Tailor-Made Investing

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.

Can these fund charges really be justified? IN a time of economic hardship and stock market volatility and when fat cat bonuses are under tough scrutiny, you have to question the growing trend among fund managers to introduce performance fees on their funds. IAN LOWES takes a look

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.

Pre-funding a government's future financial obligations--the New Zealand superannuation case study

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.

Retailers cutting capital expenditure budgets in '09

The required rate of return then is the relevant hurdle rate under centralization.

Delegated investment decisions and private benefits of control

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.

The effects of hurdle rates on the level of escalation of commitment in capital budgeting

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.

Do we need CAPM for capital budgeting?

The standard practice is to use a flat hurdle rate, across all the stages of a project.

How to manage risk better...

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.

Albertson's exiting several markets

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.