The hurdle rate plays a crucial role in the investment valuation process as it is the minimum rate of return expected on an investment. It is used to determine the potential of the investment and whether it is worth pursuing. The hurdle rate is often used to compare with the projected rate of return of an investment. If the projected return is higher than the hurdle rate, the investment is considered worthwhile. However, if the projected return is lower than the hurdle rate, the investment may not be pursued. Companies may have different hurdle rates depending on the risk associated with the proposed investments.
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