HURDLE RATE Definition

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HURDLE RATE is a term used in the budgeting of capital expenditures meaning the REQUIRED RATE OF RETURN in a DISCOUNTED CASH FLOW analysis. If the expected rate of return on an investment is below the hurdle rate, the project is not undertaken. The hurdle rate should be equal to the INCREMENTAL COST OF CAPITAL.

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PURCHASE REQUISITION is a written request for goods to be purchased. It is usually prepared by a department head or manager and sent to a firms purchasing department.

CASH IN ADVANCE is when full payment is due before the merchandise is shipped. Least risk to seller, most risk to buyer.

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