Hurdle Rate
Short definition
The hurdle rate is the minimum return required to accept a project. It is often WACC; riskier lines add a risk adjustment on top. IRR above the hurdle is not an automatic yes.
Detailed explanation
A corporate hurdle can diverge from firm WACC: a strategic premium, capital rationing, country or project beta. Currency and the inflation plane must match the cash flows.
A high hurdle kills positive-NPV projects (scarcity or conservatism). A low hurdle lets growth below WACC pass as “value”.
Why it matters for the CFO
The capex committee, acquisitions and pricing split on this line. Inflating the hurdle by a political 2 points quietly cuts the growth claim.
How to read it
IRR 24%, hurdle 20% → a 4-point margin; tenor, cash profile and covenants can still veto. There is no universal hurdle; beta and capital scarcity set it.
Numerical example
Project IRR 21%, relevant WACC/hurdle 18% → 3 percentage points above the hurdle (NPV sign is checked separately).
Related calculators
Güven Sayılgan’s writing on this topic
Challenges in Determining Company Value in Türkiye
In Türkiye, company valuation becomes more complex because of inflation, interest-rate and exchange-rate uncertainty, limited access to sector data, and an unde
3 min read
Read → FinansIs Growth Always Good?
Rising sales are often treated as success; yet growth creates economic value only when it is backed by a sustainable business model, adequate profitability and
5 min read
Read → FinansCan Forward-Looking EBITDA Be an Appropriate Choice in Company Valuations?
The forward EV/EBITDA approach may be more meaningful than trailing multiples for fast-growing firms whose current EBITDA does not reflect sustainable capacity—
12 min read
Read →Read these first
Related terms
What to learn next
Definitions are educational. They are not investment, credit or tax advice.