Required Rate of Return

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Description of Required Rate of Return. Explanation.

Definition Required Rate of Return. Description.

Required Rate of Return is the minimum profit percentage an investor requires before he is willing to provide the funds for investing. Often, the RR of R is based on the firm's cost of capital or weighted average cost of capital, plus or minus a risk premium to reflect the specific risk characteristics of the investment.

The expected return must be greater than the required return for the investment to be acceptable.

Also called "Hurdle Rate".

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Compare with: WACC  |  Internal Rate of Return  |  Net Present Value

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