Setting a Project Hurdle Rate
A first-round question on how corporate finance teams screen investment proposals.
What is a hurdle rate, and should every project at a company use the same one?
7 questions reported in Honeywell interviews, organised by the group that asks them. Every question carries a model answer and graded feedback on your own attempt.
Questions
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Hard
Model builds
Built in the spreadsheet grid
Project selection, returning capital and measuring per-share value. 2 questions
A first-round question on how corporate finance teams screen investment proposals.
What is a hurdle rate, and should every project at a company use the same one?
A senior analyst case assessing whether a portfolio review recommendation considers cash, stranded costs and opportunity cost rather than headline multiples.
A conglomerate can sell a non-core division for $600m. The division generates $55m of annual EBITDA, requires $25m of capex and uses $80m of working capital. How would you decide whether to sell it?
Driver-based forecasts, variance analysis and forecast accuracy. 2 questions
A rolling-forecast engine checking the linked outputs affected by new actuals and operating assumptions.
The first quarter closes and two operating drivers change. Update only the affected full-year outputs, then explain the revised outlook to the CFO.
An FP&A forecast update testing whether an analyst locks actuals, changes only affected drivers, and carries the revision through linked P&L and cash outputs.
You own the rolling forecast after Q1 close. Update the linked revenue, EBITDA and operating-cash outputs as new actuals and operating assumptions arrive, then write the CFO note that distinguishes a…
Adjacency analysis, competitive response and where advantage actually comes from. 1 question
Asked at diversified companies deciding where to invest or divest.
How would you run a portfolio review across several business units?
Strategic fit, synergy underwriting, dis-synergies and post-close ownership. 1 question
A corporate development case testing value, transition services, and execution risk in a divestiture process.
You are evaluating the acquisition of an industrial software division being carved out of a conglomerate. The seller's EBITDA excludes costs that will not disappear at close. Make the decisions as…
Cyclicality, operating leverage, backlog quality and mid-cycle earnings. 1 question
An industrials coverage case testing whether a fixed-price power contract reduces volatility or creates an unpriced operating commitment.
A manufacturer signs a 12-year renewable-power agreement at a rate below current electricity prices. Management calls the contract a $25m annual saving, but its main plant may reduce load by 30% if a…
Write your answer, get it graded on technical accuracy, completeness and communication, and see exactly which mechanic you missed.
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