The hurdle rate used in IRR analysis should be:

Question

Quizplus · Accepted Answer

The hurdle rate used in IRR analysis should be the discount rate used in NPV analysis. This is because the IRR represents the discount rate that makes the net present value of an investment equal to zero, and the discount rate used in the NPV analysis represents the opportunity cost of investing in the project. Therefore, using the same discount rate ensures that the IRR analysis is consistent with the NPV analysis. The risk-free rate, the current corporate bond rate, and the prime rate are not appropriate for calculating the hurdle rate in IRR analysis.

The Hurdle Rate Used in IRR Analysis Should Be