Uploaded August 2024 | Updated September 2026, 1 week ago
Session Description: It is inarguable that deciding whether to invest and where to invest is central to building a successful business. I look at the the investment decision in terms of both coming up with an accetable hurdle rate as well as measuring returns on an investment project, and examine why the way that businesses assess hurdle rates and assess investment quality change over a company's life cycle.
Slides: https://pages.stern.nyu.edu/~adamodar/pdfiles/CLC/slides/Ch6.pdf
Exercise:
a. Estimate the costs of equity, debt and capital for each of the companies in your group. Discuss the differences.
b. Estimate the accounting returns (to equity and invested capital) for each of the companies in your group. How would you read the excess returns that you get from comparing accounting returns to costs of equity/capital?
c. What does a typical project (if any) look like for your company? What challenges would you face in assessing whether it is a good or bad investment?
d. Is there optionality in investments in any of your companies? How would you make that judgment?
Session Description: It is inarguable that deciding whether to invest and where to invest is central to building a successful business. I look at the the investment decision in terms of both coming up with an accetable hurdle rate as well as measuring returns on an investment project, and examine why the way that businesses assess hurdle rates and assess investment quality change over a company's life cycle.
Slides: https://pages.stern.nyu.edu/~adamodar/pdfiles/CLC/slides/Ch6.pdf
Exercise:
a. Estimate the costs of equity, debt and capital for each of the companies in your group. Discuss the differences.
b. Estimate the accounting returns (to equity and invested capital) for each of the companies in your group. How would you read the excess returns that you get from comparing accounting returns to costs of equity/capital?
c. What does a typical project (if any) look like for your company? What challenges would you face in assessing whether it is a good or bad investment?
d. Is there optionality in investments in any of your companies? How would you make that judgment?
