Mauboussin: Companies Ignore Cost of Capital and Rely on a 15% Hurdle Rate
Michael Mauboussin · Michael Mauboussin - Pattern Recognition and Public Markets (EP.370) · Feb 19, 2024 · at 48:11
Michael Mauboussin discusses how corporate management teams evaluate investment opportunities regardless of prevailing interest rates.
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“So it turns out it's really interesting that companies, they calculate their cost of capital. They know it, but they don't use it. For almost everything they do, they use a hurdle rate, and that hurdle rate's roughly 15%. So whether the cost of capital goes to six or eight or 10, it doesn't make any difference. They're using 15%.”
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