Why does Target use different hurdle rates for the store and credit cards (9% and 4%, respectively) ? What process would you use to estimate these discount rates to see if they are reasonable?

Question

Business

Celia

12 May, 20:21

Why does Target use different hurdle rates for the store and credit cards (9% and 4%, respectively) ? What process would you use to estimate these discount rates to see if they are reasonable?

+3

Answers (1)

Know the Answer?

Ty Cochran · Answer 1

Answer: different capital funding of each store informs the rate and to make as much revenue as possible.

Explanation: The main reason that the hurdle rate for credit cards is 4% while the rate for store improvements is 9% is the different costs of capital for funding and they want to make as much revenue as possible.