What is another description for the minimum rate of return required for a project?

The minimum rate of return required for a project, often referred to as the cost of capital, represents the baseline return that an investment must generate to justify its risks and costs. This rate is crucial for evaluating whether a project is worth pursuing; it effectively serves as the hurdle rate that an investment must exceed for it to be considered viable.

The cost of capital usually encompasses both the cost of equity and the cost of debt, reflecting the overall cost of financing the project. By comparing the expected return on an investment against this minimum rate, businesses can make informed decisions about how to allocate resources and evaluate potential investments more systematically.

In contrast, net present value is a financial metric used to assess the profitability of an investment, taking into account the time value of money, but it does not specifically denote the minimum required return. Investment risk refers to the potential for losing funds or not achieving the anticipated return, rather than a specific rate. Future value pertains to what an investment will grow to over a certain timeframe, which is different from a minimum required rate of return for evaluating projects.