ABSTRACT
Firms should invest in assets only when they are expected to earn a return greater than a minimum acceptable return. This minimum acceptable return is a yardstick, called the hurdle rate. In firms, as for household, resources are scarce, but opportunities are abundant. The decision to invest is made by considering the expected return, and by comparing these to the costs involved in the project. In this Section, we will consider the cost of money as a factor in every project.
