Episode Details

Every business needs hurdle rates to decide whether to invest in a project, the right mix of debt and equity to use and how much cash can be taken out of the business (in dividends and buybacks), Every investor has to have a sense of hurdle rates, to decide whether to invest in stocks or businesses. In this session, I start by looking at the cost of capital (the most common avatar for a hurdle rate) and its many uses in finance, before examining the ingredients that go into estimating it for a company/investor. I use my (flawed) cost of capital calculations for global companies to examine how costs of capital vary across industries and market cap classes. I close with a discussion of key myths about the cost of capital, starting with the notion of a corporate hurdle rate and ending with the lie that the discount rate is the most critical part of a discounted cash flow valuation.
Slides: https://pages.stern.nyu.edu/~adamodar/pdfiles/blog/DataUpdate6for2025.pdf
Blog post: https://aswathdamodaran.blogspot.com/2025/02/data-update-6-for-2025-from-macro-to.html
Data:
1. Cost of capital, by industry
a. US: https://pages.stern.nyu.edu/~adamodar/pc/datasets/wacc.xls
b. Global: https://pages.stern.nyu.edu/~adamodar/pc/datasets/waccGlobal.xls
c. Emerging Markets:
https://pages.stern.nyu.edu/~adamodar/pc/datasets/waccemerg.xls
d. Europe:
https://pages.stern.nyu.edu/~adamodar/pc/datasets/waccEurope.xls
e. Japan
https://pages.stern.nyu.edu/~adamodar/pc/datasets/waccJapan.xls
f. India
https://pages.stern.nyu.edu/~adamodar/pc/datasets/waccIndia.xls
g. China
https://pages.stern.nyu.edu/~adamodar/pc/datasets/waccChina.xls

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