Musings on Markets

JULY 13, 2022

Country Risk: Default Risk and Ratings For investors, the most direct measures of country risk come from measures of their capacity to default on their borrowings.

Risk Premium 81

Risk Premium Risk-free Rate Start-ups Equity 81

Musings on Markets

JANUARY 19, 2022

In a post at the start of 2021 , I argued that while stocks entered the year at elevated levels, especially on historic metrics (such as PE ratios), they were priced to deliver reasonable returns, relative to very low risk free rates (with the treasury bond rate at 0.93% at the start of 2021). The year that was.

Risk Premium 80

Risk Premium Risk-free Rate Start-ups Equity 80

Musings on Markets

AUGUST 15, 2023

In every introductory finance class, you begin with the notion of a risk-free investment, and the rate on that investment becomes the base on which you build, to get to expected returns on risky assets and investments. What is a risk free investment?

Risk-free Rate 80

Risk-free Rate Treasury Risk Premium Start-ups 80

Valutico

APRIL 17, 2023

The WACC is used as the discount rate in a DCF analysis. The higher the WACC, the higher the discount rate, and so the lower the value of the business. WACCs in certain industries may be higher or lower in general, depending on the risk associated with that industry.

Weighted Average Cost of Capital 52

Weighted Average Cost of Capital Discounted Cash Flow Beta Risk-free Rate 52

Valutico

APRIL 17, 2023

The WACC is used as the discount rate in a DCF analysis. The higher the WACC, the higher the discount rate, and so the lower the value of the business. WACCs in certain industries may be higher or lower in general, depending on the risk associated with that industry.

Weighted Average Cost of Capital 52

Weighted Average Cost of Capital Discounted Cash Flow Beta Risk-free Rate 52

Valutico

APRIL 12, 2023

The WACC is used as the discount rate in a DCF analysis. The higher the WACC, the higher the discount rate, and so the lower the value of the business. WACCs in certain industries may be higher or lower in general, depending on the risk associated with that industry.

Weighted Average Cost of Capital 52

Weighted Average Cost of Capital Discounted Cash Flow Beta Risk-free Rate 52

Andrew Stolz

MARCH 20, 2020

The cost of capital also reflects the riskiness of a firm which reflects the required rate of return. A firm borrows from banks or bondholders and it has to pay the interest. It can also imply a minimum required rate of return that an investor is willing to hold stock. WACC is also viewed as appropriate for a discount rate.

Beta 52

Beta Capital Structure Risk-free Rate Weighted Average Cost of Capital 52

Musings on Markets

FEBRUARY 11, 2023

In the month since, I have added two more data updates, one on US equities and one on interest rates , but my attention was drawn away by other interesting stories. Valuing a company in Turkish Lira should give you the same value as valuing the same company in Euros, differences in riskfree rates notwithstanding.)

Risk Premium 76

Risk Premium Start-ups Equity Marketability 76

Brian DeChesare

MAY 3, 2023

But people who aim for investment banking roles are very much into those bells and whistles, so questions about the DDM and other “exotic” methodologies began rolling in. To be fair, in some industries – like commercial banks and insurance within FIG – the DDM is a core valuation methodology.

Dividends 64

Dividends Terminal Value Enterprise Value Equity 64

Brian DeChesare

FEBRUARY 28, 2024

For the right person, though, fixed income research can be even better than equity research, whether you’re at a bank, an asset management firm, a hedge fund, or a credit rating agency: Table of Contents: What is Fixed Income Research? a credit rating vs. an investment recommendation).

Equity 59

Equity Banking Start-ups Finance 59

Harvard Corporate Governance

JANUARY 24, 2023

2022 brought a halt to a nearly unabated 12-year run of booming credit markets and “lower for longer” interest rates. Sobolewski, Mr. Pessin, Mr. Simwinga, Joshua Feltman , Michael Benn , and Emily Johnson. Average yields for single-B bonds rose from under 4.7% on the first trading day of the year to over 9.2% over the same period.

Finance 224

Finance Risk-free Rate Marketability Banking 224

ThomsonReuters

MAY 6, 2021

A discounted cash flow approach involves projecting a stream of cash flows for an item and then applying a discount rate to those cash flows to calculate a single value or a range of values for that item. Developing Assumptions for Expected Cash Flows and the Discount Rate. The discount rate. Discount Rate.

Discounted Cash Flow 52

Discounted Cash Flow Risk-free Rate Risk Premium Intangible Assets 52

Musings on Markets

JANUARY 31, 2024

In my last three posts, I looked at the macro (equity risk premiums, default spreads, risk free rates) and micro (company risk measures) that feed into the expected returns we demand on investments, and argued that these expected returns become hurdle rates for businesses, in the form of costs of equity and capital.

Equity 79

Equity Book Value Start-ups Corporate Finance 79

Musings on Markets

JANUARY 21, 2023

It is the nature of stocks that you have good years and bad ones, and much as we like to forget about the latter during market booms, they recur at regular intervals, if for no other reason than to remind us that risk is not an abstraction, and that stocks don't always win, even in the long term.

Equity 70

Equity Risk Premium Start-ups Dividends 70

Musings on Markets

MAY 24, 2021

As we approach the mid point of 2021, financial markets, for the most part, have had a good year so far. Understanding these differences is key to understanding why interest rates vary across currencies and changes in exchange rates over time. How do you measure inflation?

Treasury 55

Treasury Start-ups Risk Premium Price to Book 55

Musings on Markets

JULY 25, 2023

The other is pragmatic , since it is almost impossible to value a company or business, without a clear sense of how risk exposure varies across the world, since for many companies, either the inputs to or their production processes are in foreign markets or the output is outside domestic markets.

Risk Premium 52

Risk Premium Equity Start-ups Risk-free Rate 52