Question

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?

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 .