#207 – What Are the Disadvantages of Hurdle Rate?

Strategic Treasurer

What Are the Disadvantages of Hurdle Rate? Investments require a certain minimum rate of return to make them worthwhile. On this podcast, Craig Jeffery and Paul Galloway continue their discussion on investment returns with a specific look into Hurdle Rate.

Data Update 4 for 2021: The Hurdle Rate Question!

Musings on Markets

What is a hurdle rate for a business? In this post, I will start by looking at the role that hurdle rates play in running a business, with the consequences of setting them too high or too low, and then look at the fundamentals that should cause hurdle rates to vary across companies.

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Data Update 4 for 2022: Risk = Danger + Opportunity!

Musings on Markets

Risk and Hurdle Rates In investing and corporate finance, we have no choice but to come up with measures of risk, flawed though they might be, that can be converted into numbers that drive decisions. Hurdle Rates Risk

The Stock Market Sanity Check

CFO News Room

The weighted average cost of capital (WACC) is typically used as a hurdle rate, meaning the investment’s return must outperform the hurdle rate. The discount rate is the risk-free rate of return or the return that could be earned instead of pursuing the investment.

Calculate Cost of Equity Using CAPM

CFO News Room

The CAPM formula requires the rate of return for the general market, the beta value of the stock, and the risk-free rate. There are limitations to the CAPM, such as agreeing on the rate of return and which one to use and making various assumptions.

Data Update 5 for 2022: The Bottom Line!

Musings on Markets

In my last post, I noted the decline in costs of capital for firms over time, noting that the median cost of capital at the start of 2022 is only 6.33%, across global firms, and argued that companies that demand double-digit hurdle rates risk being shut out of investments.

How to Start a Hedge Fund in the U.K.

CFO News Room

Establishing one comes with hurdles—many more in the United Kingdom than in the United States. The two and twenty fee structure pays a 2% management fee out of the assets under management (AUM) and a 20% performance fee of the appreciation or hurdle rate exceed.

CFO 130

Data Update 3 for 2021: Currencies, Commodities, Collectibles and Cryptos

Musings on Markets

Currency Pricing : Currencies are priced against each other, with the prices taking the form of "exchange rates". In other words, on days in 2020, when interest rates rose (fell) strongly, causing T.Bond prices to drop (rise), stock prices were more likely to go up (down). (I

Data Update 2 for 2021: The Price of Risk!

Musings on Markets

The failures of the signal have been variously attributed to low interest rates, accounting mis-measurement of earnings (especially at tech companies), and by some, to animal spirits. Data Update 4 for 2021: The Hurdle Rate Question.

Marking Time: A new year, a fresh semester and its class time!

Musings on Markets

Thus, you and I can disagree about whether beta is a good measure of risk, but not on the principle that no matter what definition of risk you ultimately choose, riskier investments need higher hurdles than safer investments.

Data Update 1 for 2021: A (Data) Look Back at a Most Forgettable Year (2020)!

Musings on Markets

To illustrate, consider a practice in valuation, where analysts are trained to add a small cap premium to discount rates for smaller companies, on the intuition that they are riskier than larger companies. Data Update 4 for 2021: The Hurdle Rate Question.

Corporate Banks Need Radical Tech Shift, Say Analysts

PYMNTS

The weakest performers fell below the returns hurdle rate across regions and across segments, the report noted. Traditional financial institutions have been forced to look inward as they continue to face competition from alternative lenders and FinTech providers.