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Minimum Acceptable Rate of Return (MARR)

The Minimum Acceptable Rate of Return (MARR) is the minimum return that an investor or company requires from an investment project or decision. It represents the hurdle rate that must be met or exceeded for the investment to be considered worthwhile. MARR is often based on factors such as the cost of capital, perceived risk, and opportunity cost of other investments.

Example

A company sets a MARR of 12% for a new project, meaning the project must generate at least a 12% return to justify the investment.

Key points

• The minimum return required by an investor or company for an investment to be acceptable.

• Acts as a hurdle rate for investment decisions.

• Based on factors such as cost of capital, risk, and opportunity costs.

Quick Answers to Curious Questions

MARR is the minimum return that an investor or company requires for an investment to be considered worthwhile.

It is determined based on factors like cost of capital, perceived risk, and opportunity cost of other investments.

It serves as a benchmark to assess whether an investment can generate sufficient returns to justify the risk and capital commitment.

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