Question

What is the difference between MARR(100 word), Discount Rate(100 words), and Interest Rate(100 word )? Do not write more than 100 words for each concept.

Answer 1

1.MARR(Hurdle Rate)

It is the minimum or lowest rate per return from project, which Must earn in order to offset the costs of investment, simply its a minimum amount of expenses regard investment from Project.

It always little bit more than Breakeven point of internal rate.

If Internal rate is equal or more than Hurdle Rate (MARR) then favourable Decision can be expected on project.

With MARR/Hurdle rate project can evaluated by with discounting future cash flows with Current or present for calculating present net NPV Or Value.

MARR represent different between Present Cash Inflow and value of outflows.

2.Interest Rate -

Interest rate Always taken From Borrower By Lender, it is the amount for use of asset of Lender.,

Simply lender may be bank, or Borrower is any individual, who Take this amount in the form of loan from Lender.

Interest rate depend on many type of factors and risk such as borrower creditworthiness, or risk related lending,

Interest rates are calculated in view of lenders, also it can be affected by Demand and supply in supply of in Economy.

Interest rate charge in two methods Compound interest and Simple interest.

Interest Rate Include more Risk compare to Discount Rate and MARR

3.Discount Rate –

Discount rate is interest rate which is charged by Federal Reserve from commercial banks and institutions, on its own night loans.,

Simply it is related to interest rate taken from borrower, Lender is provide loan to borrower and take interest from him or her, Lender is bank or institutions, so these lenders taken loan from Federal Reserve Bank and provide them to Lender for interest rate earn.,

Discount rate is decided on average rate and after that provide discount rate to banks.

Determine present value of money with future cash flow in the discounted cash flow analysis, It is beneficial for investor.,

Discount rate not affected by demand and supply in supply in economy.