A large integrated oil company is considering whether to change it from a single hurdle rate to several hurdles for project analysis. Raises questions: 1) determining the cost of equity, 2) adjust the usefulness of several hurdles for project risks, and 3) differences between a project risk and its impact on the overall business risk, and 4) the boundaries of the project analysis and investment budget systems.

A large integrated oil company is considering whether to change it from a single hurdle rate to several hurdles for project analysis. Raises questions: 1) determining the cost of equity, 2) adjust the usefulness of several hurdles for project risks, and 3) differences between a project risk and its impact on the overall business risk, and 4) the boundaries of the project analysis and investment budget systems.
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Thomas R. Piper
Source: Harvard Business School
5 pages.
Release date: 01 April 1975. Prod #: 275113-PDF-ENG
Enzone Petroleum Corp. HBR case solution