What Is an 8% Hurdle Rate?
The hurdle rate is an important metric when it comes to future projects. A company will determine if it should take on a capital project and the level of financial risk. If the expected rate of return is above the hurdle rate, the financial project is considered a good investment. If the rate of return or return on investment is projected to be below the hurdle rate, the investors might choose not to take the project. A hurdle rate is sometimes referred to as the break-even yield. An 8% hurdle rate means the project is projected to return 8% above costs. The riskier a project is, the higher one will compare the hurdle rate with less risky projects.