Cash Flow Return on Investment (CFROI) is a financial metric that calculates the Internal Rate of Return (IRR) on investments, specifically focusing on the cash flows generated by the investment. CFROI is used to evaluate the performance of a business or an investment by comparing the generated cash flows to the initial capital invested. The CFROI is particularly useful in assessing whether the cash flows of a project or investment exceed the operational costs and the capital costs, including the hurdle rate. The hurdle rate is a minimum acceptable rate of return, often set by management, that the investment must exceed to be considered viable and profitable. By comparing the CFROI to the hurdle rate, investors and managers can determine whether an investment is performing satisfactorily and generating sufficient returns to justify the risks involved. This metric helps in making informed financial decisions and aligning investment outcomes with business strategies.

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