Consultants’ Commentary: FX Trends
Gregory V. Milano and Jeffrey L. Routh
Companies typically evaluate the returns expected from new investments against a “hurdle rate” or benchmark. Investments that earn returns in excess of the hurdle rate are expected to create value for shareholders and vice versa. When considering investments outside their home country, executives normally increase the hurdle rate to account for risk but our capital markets research shows that in faster growing emerging economies such as Brazil, India and China, investors tend to demand lower returns on capital, not higher.
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