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Hurdle Rate
The minimum return a proposed investment must clear to be approved.
- Area
- Accounting
- Also known as
- minimum acceptable rate of return, required rate of return
- In this area
- 51 terms of 259
A hurdle rate is the threshold return a capital project has to beat before it is funded, normally set at or above the cost of capital. Proposals below it are declined regardless of how attractive they look in isolation.
It stops capital budgeting becoming a contest of enthusiasm. Applied consistently it also makes unlike proposals — a second forklift against a warehouse extension — directly comparable.
Hurdle Rate is not just a definition here
Accounting runs on this vocabulary every day in AWRA OpsHub — 51 of our 259 glossary terms describe things the platform actually does.