Invest in assets that earn a return greater than the minimum acceptable hurdle rate
The hurdle rate should reflect the riskiness of the investment and the mix of debt and equity used to fund it.
The return should reflect the magnitude and the timing of the cashflows as well as all side effects.
Find the right kind of debt for your firm and the right mix of debt and equity to fund your operations
The optimal mix of debt and equity maximizes firm value
The right kind of debt matches the tenor of your assets
If you cannot find investments that make your minimum acceptable rate, return the cash to owners of your business
How much cash you can return depends upon current & potential investment opportunities
How you choose to return cash to the owners will depend whether they prefer dividends or buybacks