"Whereas Poterba and Summers (1995) find that firms use hurdle rates that are unrelated to their CAPM betas, Graham and Harvey (2001) find that 74% of their survey firms use the CAPM for capital budgeting. We provide an explanation for these two apparently contradictory conclusions. We find that...

Whereas Poterba and Summers (1995) find that firms use hurdle rates that are unrelated to their CAPM betas, Graham and Harvey (2001) find that 74% of their survey firms use the CAPM for capital budgeting. We provide an explanation for these two apparently contradictory conclusions. We find that...

Whereas Poterba and Summers (1995) find that firms use hurdle rates that are unrelated to their CAPM betas, Graham and Harvey (2001) find that 74% of their survey firms use the CAPM for capital budgeting. We provide an explanation for these two apparently contradictory conclusions. We find that...

We find that operational constraints lead firms to use high discount rates that exceed their cost of financial capital, based on an original survey of CFOs with firm identifiers linked to responses. Firms with abundant access to capital but limited qualified management or manpower appear to...

We survey a cross-section of 127 companies to gain insight on various dimensions of firms' investment decisions. The questions posed by our survey address the hurdle rates firms use, calculations of project-related cashflows, and the interaction of cashflows and hurdle rates. Unlike previous...