how to use hurdle rate
investors and businesses use hurdle rates to evaluate an investment or project s potential investors look at the risk premium for a potential investment since it captures the anticipated amount of risk involved the higher the risk the higher the risk premium should be risk premiums are typically added to the wacc for a more realistic hurdle rate using a hurdle rate to determine an investment s potential helps to take our feelings or preferences for it out of the equation by assigning a realistic risk factor an investor can use the hurdle rate to assess whether the project has financial merit despite its intrinsic value 