Question: The term hurdle rate is often used in the context
The term hurdle rate is often used in the context of project evaluation and is sometimes used to refer to the risk-adjusted discount rate—i.e., the required rate of return on a project with a given level of risk. The risk adjusted discount rate refers to the cost of capital or opportunity cost of raising money to finance an in-vestment, and hurdle rates are generally higher than the cost of capital. Why might a firm use hurdle rates that exceed its cost of capital?
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