The hurdle rate that is used in a net-present-value analysis is the same as the firm's:

Question

Quizplus · Accepted Answer

The hurdle rate used in a net-present-value analysis is the discount rate that represents the firm's minimum desired rate of return or its opportunity cost of capital. It is the rate that the cash flows from an investment must exceed in order for the investment to be profitable. Therefore, choice E is the correct answer, as it states that the hurdle rate is the discount rate and minimum desired rate of return, which accurately represents its use in net-present-value analysis. Choices A, B, C, and D are incorrect because they do not accurately represent the hurdle rate.

The Hurdle Rate That Is Used in a Net-Present-Value Analysis