What is MARR and how to set it for your business

MARR is the most sensitive number in any project evaluation. Shifting it a few points can turn a profitable business into a value destroyer — or the other way around. That's why, before calculating any indicator, you have to set it right.

What MARR is

The Minimum Attractive Rate of Return — also called discount rate, or cost of capital in corporate contexts — is the minimum return you require from your investment before considering it viable.

If your business doesn't yield at least as much as your best available alternative, you're better off putting the money in that alternative. MARR is that threshold.

Think of it as the minimum interest you'd demand on a loan. If your business doesn't beat it, take a savings account instead.

Want to skip the math and see the direct impact on your project? Load it into the dashboard: MARR is one of the inputs and you'll watch how it shifts the result in real time.

Why MARR matters so much (especially in high-inflation economies)

MARR is the most sensitive parameter in the evaluation. It directly drives NPV and defines the threshold that IRR is compared against. Choose it badly and the entire analysis is invalidated.

In countries with high inflation, the challenge intensifies. With inflation swinging between 50% and 300% annually, the difference between using a nominal rate and a real rate can be the gap between thinking a project is highly profitable and discovering it barely covers inflation.

The components of MARR

Opportunity cost

Opportunity cost is what you give up by investing in the business instead of another option. Common references:

Risk premium

The premium compensates for the additional uncertainty of investing in your own business versus a financial investment. Typical ranges:

• +10–15% — proven model, low operational uncertainty.
• +20–30% — startups or businesses with market uncertainty.
• +30% or more — speculative projects or volatile industries.

If your project is funded by debt and equity in significant proportions, just adding opportunity cost and premium isn't enough — calculate WACC, which weights the cost of each source.

Nominal MARR vs. real MARR: the inflation problem

This is the most confusing point for entrepreneurs in high-inflation economies. There are two ways to express MARR.

Nominal rate

Includes inflation. If inflation is 80% per year and you want a real return of 20%, your nominal MARR is:

With a 116% MARR, cash flows must be in nominal currency (prices adjusted for inflation each year).

Real rate

Excludes inflation. You work with a 20% real MARR and all flows in constant currency (no adjustment). When done properly, NPV gives the same answer either way.

Critical rule: nominal rate with nominal flows. Real rate with real flows. Mixing them invalidates the analysis.

How to set MARR in practice

Concrete starting points by entrepreneur profile:

These ranges are starting points, not verdicts. Each business has a specific risk profile that adjusts the premium — the idea is to debate it with partners and, if you're financing the project, with your lender.

Apply it to your own project

In Factibilidad.io you input the MARR that best represents your situation. The calculation applies the Fisher correction automatically when working with inflation, so results stay consistent — and you'll see the direct impact on your NPV and your IRR.

Apply what you read — load your project and try different MARRs to see how sensitive NPV is to this variable.