Musings on Markets

AUGUST 19, 2024

With more mature companies, as investment opportunities become scarcer, at least relative to available capital, the focus not surprisingly shifts to financing mix, with a lower hurdle rate being the pay off.

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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?

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Musings on Markets

FEBRUARY 15, 2023

While there is little that can be done about past mistakes, we can at least stop adding to those mistakes, and one place to start is by updating hurdle rates, as investors and businesses, to reflect the world we live in, rather than some normalized past version of it.

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Musings on Markets

JANUARY 12, 2021

Discount rates in intrinsic valaution have to change to reflect current market conditions, and can be expected to change over time.

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Valuation Corporate Finance Finance Investments 52

Musings on Markets

JANUARY 20, 2021

Data Update 4 for 2021: The Hurdle Rate Question. YouTube Video Spreadsheets Implied ERP for the S&P 500: January 1, 2021 Spreadsheet to value the S&P 500 on January 1, 2021 Data Updates for 2021 Data Update 1 for 2021: A (Data) Look Back at a Most Forgettable Year! Data Update 2 for 2021: The Price of Risk!

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Musings on Markets

JANUARY 31, 2024

In my last three posts, I looked at the macro (equity risk premiums, default spreads, risk free rates) and micro (company risk measures) that feed into the expected returns we demand on investments, and argued that these expected returns become hurdle rates for businesses, in the form of costs of equity and capital.

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Musings on Markets

JANUARY 27, 2021

Data Update 4 for 2021: The Hurdle Rate Question. YouTube Video Spreadsheets Daily data for commodities, currencies, collectibles and cryptos - 2020 Data Updates for 2021 Data Update 1 for 2021: A (Data) Look Back at a Most Forgettable Year! Data Update 2 for 2021: The Price of Risk!

Currencies 52

Currencies Investments Marketing Treasury 52

Barry Ritholtz

FEBRUARY 21, 2023

That means a low hurdle rate. If you think about the fact that we’re client-owned, so we’re delivering as close to at costs as possible. We’re going to be a lower fee than almost everybody out there. So we do that. But don’t take a lot, you don’t have to.

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Leadership Investments Profit and Loss Technology 111

Barry Ritholtz

MAY 9, 2023

But I don’t think this is a wholesale shift, we’re in a higher rate environment, obviously, for now. And while rates will likely start rolling over into next year, I think we’re in an environment where the hurdle rate for making more illiquid investments is higher.

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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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CFO News Room

NOVEMBER 8, 2022

” look at the Monte Carlo simulations, look at what is the hurdle rate. But really the main driver in that first meeting is, “Hey, we’ve got to update the financial plan. Did things change significantly since we updated the plan?,”

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Barry Ritholtz

NOVEMBER 8, 2022

In a way, it’s more explicit in a capitalist economy because you’re paying a certain rate of interest on your loan, or you have a certain required hurdle rate on your investment, or you’re applying a certain discount in the valuation of an asset.

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Musings on Markets

AUGUST 15, 2023

As the risk-free rate rises, expected returns on equities will be pushed up, and holding all else constant, stock prices will go down., and the reverse will occur, when risk-free rates drop.

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Musings on Markets

JANUARY 5, 2024

Employee Count & Compensation I nvesting Principle Financing Principle Dividend Principle Hurdle Rate Project Returns Financing Mix Financing Type Cash Return Dividends/Buyback s 1. Insider, CEO & Institutional holdings 2. Aggregate operating numbers 3. Beta & Risk 1. Return on Equity 1. Debt Ratios & Fundamentals 1.

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CFO News Room

JANUARY 7, 2023

In the three posts that follow, I will look at the shifts in corporate hurdle rates (in post 6), debt loads and worries (in post 7) and dividends/cash returned in post 8.

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Musings on Markets

JANUARY 6, 2023

In the three posts that follow, I will look at the shifts in corporate hurdle rates (in post 6), debt loads and worries (in post 7) and dividends/cash returned in post 8.

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Musings on Markets

FEBRUARY 27, 2023

Furthermore, do they optimize they debt ratios to deliver the lowest hurdle rates. Do companies optimize financing mix? Do companies consider the trade off between tax benefits and bankruptcy costs when borrowing money?

Corporate Finance 52

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Musings on Markets

JANUARY 9, 2021

Data Update 4 for 2021: The Hurdle Rate Question. YouTube Video Data Updates for 2021 Data Update 1 for 2021: A (Data) Look Back at a Most Forgettable Year! Data Update 2 for 2021: The Price of Risk! Data Update 3 for 2021: Currencies, Commodities, Collectibles and Cryptos!

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Musings on Markets

JANUARY 28, 2024

In particular, there are wide variations in how risk is measured, and once measured, across companies and countries, and those variations can lead to differences in expected returns and hurdle rates, central to both corporate finance and investing judgments. What's coming?

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Musings on Markets

JULY 25, 2023

Company Hurdle Rates This post has already become much longer than I intended it to be, but I want to end by bringing these equity risk premiums down to the company level, and examining how they play out in hurdle rates, to be used in investment analysis by companies and valuation by investors.

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Currencies Hurdle Rate Valuation Marketing 52

Barry Ritholtz

MAY 21, 2024

But now we’re back to a more normal hurdle rate. 5% interest rates is not super high. If, if I’m a corp, if I’m a CFO and I’m not gonna make my earnings numbers next quarter, I could have borrowed cash for free and bought back enough shares to beat that number, right? 00:50:03 Not anymore.

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Barry Ritholtz

DECEMBER 26, 2023

So it’s gonna take a little more confidence, you know, and equities to, because you get your, your hurdle rates higher, you know? Now, you know, they don’t want people to take on as much risk in, in some regard. So that 00:48:50 [Speaker Changed] Makes sense.

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Barry Ritholtz

NOVEMBER 25, 2024

So you’ve got, you’ve got a modeling hurdle rate that you need to figure out when you’re adding diversifiers. So I sell my stocks to make room for gold and it doesn’t, turns out my forecast is wrong. Well, there’s a real opportunity cost there, right? The second is behavioral.

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Musings on Markets

JULY 24, 2024

Country Risk in Business Most corporate finance classes and textbooks leave students with the proposition that the right hurdle rate to use in assessing business investments is the cost of capital, but create a host of confusion about what exactly that cost of capital measures.

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