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?

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Business

Cheyenne Newton

Today, 10:10

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?

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Cindy Glass · 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.