What does MARR mean in the economy?

MARR in economics is called the lowest acceptable rate of return in English and the lowest acceptable rate of return in Chinese, also known as the lowest rate of return on capital. The minimum rate of return on capital refers to the minimum rate of capital investment required by investors. Only by meeting this minimum standard can investors be willing to invest. In the discounted cash flow method, the minimum return on capital is a problem for decision makers to consider a project. If the return on an investment is higher than the minimum return on capital, the investment is worthwhile. If it is lower than the minimum return on capital, the project should be abandoned, because it will lead to losses for investors. Usually, the minimum return on capital is the company's capital cost or average weighted capital cost plus risk premium, which reflects the specific risk characteristics of the invested project. The minimum rate of return on capital is also called the required rate of return.

First, the rate of return calculation method

Return on investment = annual profit or average annual profit/total investment × 100%. Return on investment refers to the value that should be returned through investment, that is, the economic return that an enterprise obtains from an investment activity. It covers the profit target of the enterprise. Profit is related to the property necessary to put into operation, because managers must make profits through investment and existing property. Investment can be divided into two categories: industrial investment and financial investment. People usually say that financial investment mainly refers to securities investment, because risk premium = (average risk asset income-risk-free income) * β, so necessary income = risk-free income+(average risk asset income-risk-free income) * β, and necessary income is the income of other substitutes with the same risk, just like financial securities with the same risk.

2. Description of necessary remuneration

1, the concept that the necessary rate of return is not at the same level as coupon rate, actual rate of return and expected rate of return (yield to maturity). When issuing bonds, coupon rate is determined according to the necessary rate of return of venture capital. The necessary rate of return is the rate of return required by investors for equal-risk investment, which accurately reflects the risk of future cash flow and is also called the lowest rate of return that people are willing to earn. In a completely efficient market, the expected rate of return of securities is its necessary rate of return.

2. coupon rate and the necessary rate of return can be divided into real interest rate (fixed interest rate) and nominal interest rate (quoted interest rate). All interest rates can be divided into nominal interest rates and real interest rates;

3. In order to facilitate the comparison of different bonds, it is necessary to convert the interest rates of different interest periods into annual interest rates when quoting. The quoted interest rate is obtained by multiplying the actual periodic interest rate by the number of times of compound interest within one year, which has formed a convention.