required rate of return

Definition

The required rate of return in a discounted cash flow analysis, above which an investment makes sense and below which it does not. Often, this is based on the firm's cost of capital or weighted average cost of capital, plus or minus a risk premium to reflect the project's specific risk characteristics. also called hurdle rate.

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When they ran their model they determined the required rate of return needed to be five percent for the deal to work.!

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The required rate of return for the Johnson account was well over the amount that was predicted. The market tipped in our favor.

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Tim saw that the required rate of return needed on the stock he was considering was just not there as seen over the last five years and he decided to pass up the opportunity.

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