Harvard Business Review

APRIL 30, 2015

You’ll likely be asked to show that the return on the investment will be better than your company’s cost of capital. To learn more about this commonly used business term, I spoke with Joe Knight, author of the HBR TOOLS: Return on Investment and co-founder and owner of www.business-literacy.com.

Cost of Capital 8

Cost of Capital Cost Finance Discount 8

Harvard Business Review

APRIL 16, 2012

Strategic cash usually is invested in high quality short-term securities; this ensures safety and liquidity, but produces a meager return on investment—especially in a low interest rate environment—and does not achieve the company's cost of capital. How Should You Approach Strategic Cash?

Company 15

Company Cost of Capital Finance Long-term 15

Harvard Business Review

JUNE 18, 2015

Rather, they rely on internal rates of return and multiples of invested capital. Furthermore, few PE investors explicitly use the capital asset price model (CAPM) to determine a cost of capital.

CAPM 8

CAPM Discounted Cash Flow Company Rate of Return 8

Harvard Business Review

APRIL 9, 2015

Determine the minimum return required by your company. The minimum rate of return is often called a hurdle rate, and it is determined by your company’s finance department. Companies may have more than one hurdle rate depending on the risk involved in proposed investments. Evaluate the investment.

ROI 8

ROI Analysis Rate of Return Net Present Value 8

Harvard Business Review

AUGUST 27, 2015

Companies in the top one-fifth of profitability earn, in aggregate, about 70 times more economic profit (accounting profit less cost of capital) than those in the middle three-fifths combined, according to McKinsey’s database of 3,000 large, publicly listed, nonfinancial U.S. companies have enjoyed supernormal rates of return.

ROIC 8

ROIC McKinsey Company GDP 8

Harvard Business Review

JUNE 22, 2015

. “It’s one of the more popular ways that managers calculate marketing ROI,” says Avery, pointing out that other common ones include calculating the investment payback period, calculating an internal rate of return, and using net present value analysis.

Payback Period 8

Payback Period Fixed Costs Analysis Price 8

Harvard Business Review

OCTOBER 21, 2016

Significant cost reductions can result from improving operational efficiency through better management of natural resources like water and energy, as well as minimizing waste. One study estimated that companies experience an average internal rate of return of 27% to 80% on their low carbon investments.

Supply Chain 8

Supply Chain Price Loyalty Efficiency 8