Hurdle Rate Calculator

Hurdle Rate Calculator calculator can be used to determine the minimum return an investment must achieve to be acceptable. It helps in making informed investment decisions by comparing the required rate of return with the expected return on an investment.

Input Parameters

Calculation Results

Calculation Formula

Hurdle Rate = (Annual Revenue - Annual Expenses) / Initial Investment

Where:
Annual Revenue - Total revenue generated by the project annually
Annual Expenses - Total expenses incurred by the project annually
Initial Investment - Total initial cost of the project

Hurdle Rate

$0.00%

This is the minimum return required for the investment to be acceptable

Hurdle Rate Calculator Calculator Usage Guide

Learn how to use the Hurdle Rate Calculator calculator and its working principles

How to Use the Calculator

  1. Enter the Initial Investment amount (the total amount of money invested).
  2. Enter the Annual Revenue (the expected revenue generated by the investment each year).
  3. Enter the Annual Expenses (the expected expenses incurred by the investment each year).
  4. Enter the Project Life (the number of years the investment will be active).
  5. Click the "Calculate" button to compute the Hurdle Rate.
  6. Review the Hurdle Rate result, which represents the minimum return percentage required for the investment to be considered acceptable.

Understanding the Hurdle Rate

The Hurdle Rate is a critical metric in investment analysis. It represents the minimum acceptable rate of return that an investment must achieve to be considered viable. If the expected return on an investment is lower than the Hurdle Rate, the investment should typically be rejected.

Example

Suppose you have invested $100,000 in a project. The project is expected to generate $30,000 in revenue annually, with $10,000 in expenses annually. The project life is 5 years.

Calculation:
Hurdle Rate = ($30,000 - $10,000) / $100,000 = 0.20 or 20%

In this case, the Hurdle Rate is 20%. This means the project must generate at least a 20% return to be considered acceptable.