Musings on Markets
FEBRUARY 10, 2021
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. What is a hurdle rate?
CFO News Room
JANUARY 20, 2023
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. By the same token, Embraer and TCS are global firms that happen to be incorporated in Brazil and India, respectively.
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Musings on Markets
FEBRUARY 8, 2022
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. In corporate finance, this takes the form of a hurdle rate , a minimum acceptable return on an investment, for it to be funded.
Musings on Markets
FEBRUARY 27, 2023
In fact, that may explain why firms that trade at low EV to EBITDA multiples are more likely to become targets in leveraged buyouts (LBOs) or leveraged recapitalizations. Business risk : Not surprisingly, for any given level of cash flows and marginal tax rate, riskier firms will be capable of carrying less debt than safer firms.
CFO News Room
JANUARY 7, 2023
Mean reversion : I am not a knee-jerk believer in mean reversion, but the tendency for numbers to move back towards averages is a strong one. Counter made-up numbers : It remains true that people (analysts, market experts, politicians) often make assertions based upon either incomplete or flawed data, or no data at all.
Musings on Markets
JANUARY 6, 2023
Mean reversion : I am not a knee-jerk believer in mean reversion, but the tendency for numbers to move back towards averages is a strong one. Counter made-up numbers : It remains true that people (analysts, market experts, politicians) often make assertions based upon either incomplete or flawed data, or no data at all.
Musings on Markets
MARCH 8, 2023
The dividend principle, which is the focus of this post is built on a very simple principle, which is that if a company is unable to find investments that make returns that meet its hurdle rate thresholds, it should return cash back to the owners in that business.
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