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Investing for Productivity and Prosperity (1994) / Chapter Skim
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Hurdle Rates and Investment Decisions
Pages 23-25

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From page 23...
... To explain investment patterns, some economists believe that the high cost of capital in the United States relative to major foreign competitors has had a significant deterrent effect. The board has looked carefully at this issue.
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From page 24...
... It therefore depends on the tax rules governing corporations as well as on the cost of funds.7 A firm's hurdle rate includes the cost of wapiti ~d also an internal risk premium considered applicable by management to the particular project at that .
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From page 25...
... Data are not plentiful apart from data on profit rates in the United States and Japan. Nevertheless, Hatsopoulos and Poterba develop important evidence on hurdle rates in their comparison of the rates of return earned by nonfinancial corporations in the United States and Japan.~° They find that since 1975 the operating returns of Japanese nonfinancial corporations have averaged only 5.2 percent whereas comparable U.S.
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