The hurdle rate approach in determining the acceptability of projects:
A)is an improvement over the risk-adjusted discount rate approach because it provides for an objective basis to determine risk premiums for individual projects.
B)is a modification of the internal rate of return approach.
C)is inconsistent with the principle of project risk balancing.
D)is a method used with the certainty equivalent approach.

Question

Quizplus · Accepted Answer

The hurdle rate approach is a modification of the internal rate of return (IRR) approach, as it sets a minimum acceptable return (hurdle rate) that a project must achieve to be considered acceptable.

The Hurdle Rate Approach in Determining the Acceptability of Projects