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- Hurdle rate and WACC (Weighted Average Cost of Capital) are related but serve different purposes123:
- WACC is the average cost of capital used to discount future cash flows in capital budgeting.
- Hurdle rate includes the WACC plus a risk premium to ensure the investment justifies the risk.
Learn more:✕This summary was generated using AI based on multiple online sources. To view the original source information, use the "Learn more" links.The hurdle rate includes the WACC plus a risk premium that reflects the project’s level of risk. While WACC provides a baseline cost of funding, the hurdle rate includes other considerations to ensure the investment is justified in terms of return.www.trading212.com/learn/investing-101/hurdle-ratesIn a classroom, corporate finance setting, hurdle rate and WACC are the same thing. WACC is used as a hurdle rate to assess whether or not a company produces value for investors measured by ROIC. If a company's WACC is greater than it's ROIC then the company is generating a net negative return on capital and vice versa.www.wallstreetoasis.com/forum/equity-research/wa…Since the hurdle rate is the lowest return a company expects from an investment to justify the risk, we can use the WACC to help calculate this rate. The WACC reflects the average rate of return a company must earn on its investments to satisfy its shareholders and debt holders.www.investopedia.com/terms/h/hurdlerate.asp - People also ask
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· Most companies use their weighted average cost of capital (WACC) as a hurdle rate for investments. This stems from the fact that companies can buy back their own shares as an alternative to making a new …Up to3.2%cash backHurdle Rate vs Discount Rate: Differences, Calculations, and ...
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