For corporate finance role, how do you usually do new business analysis?
For corp finance role, how do you usually do new business analysis? Another question: how do you usually calculate hurdle rate?
The hurdle rate in corp dev is WACC. IRR has to be greater than WACC for us to pursue a potential acquisition.
Interesting, our hurdle rate is a bit higher than the WACC.
Probably industry specific. EDIT: Just thought about this and I could see how the WACC could be used as a hurdle rate.
What's the rationale for this? I assume part of this is just being conservative, but any other reasons besides that? I thought it was pretty common to use WACC as the hurdle rate.
Thank you all for the comments. Hurdle rate, WACC are usually used for decision making to compare with a new prod/business potential IRR.
@anonguytoibd, I would like to ask for new business for new prod/business line and new business for bringing new customer or new supplier. How does everyone do the analysis to decide which supplier the company should work with if there are multiple suppliers choice?
He means "how do you do new business analysts" literally.
So basically he has some hotties he works with and wants to know how to jump in. I'd say best tactic is tequila.
I have no experience in corporate finance but here's my thought. The hurdle rate depends on whether it's a specific project affecting a segment of the business or a firm-wide decision. The WACC needs to be adjusted (through unlevering and levering) accordingly. Is it correct?
The difference is likely some factoring for a risk adjustment. Forecasts are always wrong (usually too high for early stage companies) and integrating a new acquisition always brings risk as well.
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