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The finance department plays a critical role in determining the hurdle rate for a firm. The hurdle rate is essentially the minimum acceptable return on an investment. This rate is vital for evaluating the attractiveness of potential investments and projects. The finance team typically takes into account factors such as the firm's cost of capital, which includes the cost of equity and debt, the risk associated with the investment, and the overall economic environment.

They also use various methodologies, such as the Weighted Average Cost of Capital (WACC), to calculate the hurdle rate, requiring an in-depth understanding of financial metrics and market conditions. This comprehensive analysis by the finance department ensures that the firm makes informed decisions on capital investments that align with its strategic objectives and risk tolerance.

While middle management may influence project selection and shareholders may express their expectations for returns, responsibility for setting the hurdle rate lies with the finance department due to their expertise and insights into financial operations. The accounting department, meanwhile, typically focuses more on recording and reporting financial transactions rather than strategic financial decision-making related to investments.