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Investing for Productivity and Prosperity (1994) / Chapter Skim
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Why Do Hurdle Rates Differ?
Pages 26-27

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From page 26...
... Numerous academic studies have attempted to measure the cost of capital or the cost of funds in the United States and Japan (Franker' in press; McCauley and Zimrner, 1989; Poterba' 1991~. There is general agreement that in the early l980s, largely because of differences in real interest rates and leverage ratios, Japanese firms faced a lower cost of .
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From page 27...
... The board is most concerned about persistent differences in the cost of equity because of its bearing on relative rates of investment in technology. Corporate investments in certain intangible assets such as research and development, new business development, and development of human capital or training are most often financed with equity, partly because they do not give rise in the short run to an easily visible asset that can be measured.
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Key Terms

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  • time horizons
  • tax treatment
  • intangible investments
  • firms faced

  • intangible assets
  • corporate investments
  • competitive position
  • profit rates
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  • japanese competitors
  • leverage ratios
  • investment projects
  • human capital
  • anticipated returns

  • investment time
  • competitive industry
  • rates albeit
  • firms invest
  • systematically lower

  • evaluating investment
  • internationally competitive
  • negative effect
  • easily visible
  • studies support

  • returns offset
  • exchange rates
  • albeit based
  • term investors
  • academic studies


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