Quick Definition

Hurdle rate is the minimum rate of return on an investment that is required by investors or managers to proceed with the project.

Formula

Examples

• 1A venture capital firm may require a hurdle rate of 20% to consider investing in high-risk startups.
• 2A company evaluates a new project that promises a 15% return, but does not proceed because it is below their hurdle rate of 18%.
• 3In real estate development, a hurdle rate of 12% might be used to assess the viability of purchasing and renovating older properties.

Tags