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Finally, my starting cost of capital of 10.15% reflects the reality that the riskfree rate and equity riskpremiums have risen over 2022, and my ending number of 9% is an indication that I expect Tesla to become less risky over time. and 10.9%.
10] , [23] , [2] Discount Rate: The rate used to discount future cash flows is typically the cost of equity, calculated via the Capital Asset Pricing Model (CAPM): Cost of Equity = Risk-Free Rate + Beta * Market RiskPremium. [23] to 2.5% [23] , [2] ) to ensure mathematical validity. [2]
” [1] [2] [4] [15] [19] It estimates a future exit value (often based on projected earnings and industry multiples) and works backward, using the high ROI targets VCs require (due to portfolio risk), to determine what the company could be worth today to justify that future return. [15] 2] [15] [17]. 2] [17].
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