Manager ofthen define an average hurdle rate as the company? A. Opportunity cost

Question

Manager ofthen define an average hurdle rate as the company? A. Opportunity cost B. Cost of capital C. Both a and b D. Niether a nor b Manager ofthen define an average hurdle rate as the company? A. Opportunity cost B. Cost of capital C. Both a and b D. Niether a nor b Manager ofthen define an average hurdle rate as the company? A. Opportunity cost B. Cost of capital C. Both a and b D. Niether a nor b A. Opportunity cost B. Cost of capital C. Both a and b D. Niether a nor b A. Opportunity cost B. Cost of capital C. Both a and b D. Niether a nor b

Explanation / Answer

Hurdle rate is the minimum expected return of investment which can be computed in several ways depeding on the perspective of the investor. There are few investors who beleive that they should get "x%" more than there cost of capital, these investors use hurdle rate as cost of capital. On the other hand there are investors who beleive in determing what would be profit on project "A" if buy selecting project "B" we may loose another avaliable opportunity i.e Project "B", hence opportunity cost of loosing the other project i.e Project "B" if this project i.e Project "A" is considered is evaluated to determine whether accepting Project A is viable, these investors prefer opportunity cost has hurdle rate.

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