Skip to content
Latest
Yield Update
Subscribe
TechExplainerPast Article

Capital Spending and the Cost of Waiting

A project deferred is not free. The cost is whatever the published yields say about time, plus the project you did not build.

By Priya Raman, Tech and Business Analyst

New York1 min read

blue circuit board
blue circuit boardPhoto by Umberto on Unsplash

Waiting has a price. Money not spent on a long project can sit in a short Treasury, at a yield you can look up, or it can sit in a deposit account at a bank's rate. The yield is the published compensation for waiting. It is also the hurdle a risky project has to clear in the mind of whoever is allocating the cash.

That hurdle is not a scientific constant. Different firms use different ones, and most do not publish the worksheet. What can be said is that when the published long yield is higher, the hurdle that is tied to it is higher, and late cash flows have to be larger to justify themselves.

None of this predicts which projects get cut. It describes the comparison a careful manager is already making. The comparison needs the yield, dated, and the project's own figures, which companies seldom disclose.

Subscriber content

This story is in the archive

Create a free account to read one article a day, or subscribe for full access.

Already have an account? Log in

See an error? Request a correction.