A hurdle rate is the 'line in the sand' that helps companies decide whether to pursue projects. Companies often use internal rate of return (IRR) to determine whether an investment exceeds a company's hurdle rate. Regardless of the calculation method, it is important to note that judging a project based on percentage returns can be dangerous.
WACC vs. IRR WACC and internal rate of return (IRR) measure two different concepts. While WACC measures the cost of operations through financing, the internal rate of return measures the break-even point for a specific project or investment.
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IRR is not the only capital budgeting method (net present value and discounted cash flow are other methods), it is just an example of why capital budgeting exists.
