Which of the statements below is TRUE?
A)The hurdle rate is the cost of debt needed to fund a project.
B)If the IRR exceeds a project's hurdle rate,the project should be rejected.
C)If the IRR clears the hurdle rate,the project is rejected.
D)The hurdle rate should be set so that it reflects the proper risk level for the project.

Question

Quizplus · Accepted Answer

The correct statement is that the hurdle rate should be set so that it reflects the proper risk level for the project. The hurdle rate is the minimum acceptable rate of return that a business expects to earn on an investment. It is used to evaluate potential investment opportunities and determine whether or not they are worth pursuing. The IRR is the internal rate of return, which is the expected rate of return that a project will generate over its useful life. If the IRR exceeds the hurdle rate, the project is considered viable and should be accepted.

Which of the Statements Below Is TRUE