The hurdle rate is often set at Select one a The rate the co

The hurdle rate is often set at:

Select one:

a. The rate the company could earn if the investment were placed in the bank.

b. The company\'s cost of capital.

c. 10% above the IRR of current projects.

d. 10% above the ARR of current projects.

e. The rate at which the company is taxed on income.

Solution

b. The company\'s cost of capital

The hurdle rate is the minimum required rate of return or target return that investors are expecting to receive on their investment, this is determined by calculating the cost of capital or sometimes we call it weighted average cost of capital.