Hurdle Rates For Expansion Projects And Acquisitions

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Date: 01/05/2011

Investing in a major acquisition, merger or new enterprise can be risky business - help your clients sleep at night by using hurdles rates to more accurately assess the risks and rewards of their big investment

Your client is investing in a major acquisition or merger. Or perhaps a new business is being considered - and it's hard to assess risk versus reward when there are no runs on the board. This is where hurdle rates have value. Specialist Hamish Blair, of Leadenhall Corporate Finance, says hurdle rates offer a much more accurate assessment of the return an investment will bring. He explains how hurdle rates work, the calculations used, and how hurdles rates are applied. He says a typical hurdle rate looks at a 15% return on funds before tax for an existing business, but higher for brownfield investments and higheragain for greenfield investments.There are watchouts and while many accountants can use hurdle rates when assisting clients with their investments, complex cases may need the help of a specialist.