Musings on Markets

FEBRUARY 23, 2025

It was only in 2019 that the accounting rule-writers (IFRS and GAAP) finally did the right thing, albeit with a myriad of rules and exceptions. That is where the cost of capital, the Swiss Army Knife of finance that I wrote about in my sixth data update update , comes into play as a debt optimizing tool.

Equity

Harvard Corporate Governance

AUGUST 11, 2023

If a large shareholder or a group of investors becomes concerned with the firm’s operations and management, and takes legal steps to assert their claims, it may affect a firm’s outlook, competitive position, its risk premium, and hence discounted value. This post is based on their recent paper.

Risk Premium

Musings on Markets

JANUARY 21, 2023

trillion on their market capitalization at the end of 2019. Historical Equity Risk Premium The conventional wisdom, at least as taught in business schools and practiced by appraisers, is that the only practice way to estimate equity risk premiums for the future is to use equity risk premiums earned in the past.

Equity

Musings on Markets

JANUARY 5, 2024

I have also developed a practice in the last decade of spending much of January exploring what the data tells us, and does not tell us, about the investing, financing and dividend choices that companies made during the most recent year. Beta & Risk 1. Equity Risk Premiums 2. Financing Flows 5. Debt Details 1.

Dividends

ThomsonReuters

MAY 6, 2021

The cash flows from an entire business include inflows and outflows from investing, financing, and operating activities (such as sales, collections on receivables, expenditures, and settling accounts payable). The adjustment added to the risk-free rate to arrive at the risk-adjusted rate is often referred to as the “risk premium.”

Discounted Cash Flow

Musings on Markets

JANUARY 9, 2021

For instance, I have always computed the present value of lease commitments in future years and treated that value as debt, a practice that IFRS and GAAP have adopted in 2019, but that computation requires explicit disclosures of lease commitments in future years. Macro Data I do not report much macroeconomic data for two reasons.

Risk Premium

Musings on Markets

NOVEMBER 9, 2021

My two most recent valuations were in June 2019 and January 2020, and I am going to go back to them, not just because they are recent, but because they led to investment decisions on my part. In June 2019, Tesla had hit a rough spot, partly due to concerns about production bottlenecks and debt, and partly due to self inflicted wounds.

Start-ups