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 82

Equity Book Value Start-ups Corporate Finance 82

ThomsonReuters

JUNE 15, 2021

Goodwill is an accounting term for the figure that is recorded on the balance sheet after subtracting the book value of a business from the higher price that was paid for it. Additionally, private companies have options in a few areas—most notably use of IBR or risk-free rate–that public companies do not,” she said.

Risk-free Rate 64

Risk-free Rate Equity Start-ups Book Value 64

Musings on Markets

FEBRUARY 15, 2023

It is to remedy this defect that analysts scale profits to invested capital, with equity and capital variants: In the equity version, you divide net income by book equity to estimate a return on equity, a measure of what equity investors are generating on the capital they have invested in a company.

Start-ups 52

Start-ups Equity Risk Premium Risk-free Rate 52

Musings on Markets

MAY 24, 2021

Interest Rates : The most direct link between inflation and equity value is through the risk free rate (interest rate) that forms the base for the expected returns that investors demand for investing in a company's equity, and for lending it money.

Treasury 55

Treasury Start-ups Risk Premium Price to Book 55

Valutico

OCTOBER 20, 2022

Rf = Risk-free Rate. Rm – Rf) = Equity Market Risk Premium. Now, we need to calculate the discount rate. . Risk free rate (can use 10y Treasury). Try booking a demo , if this applies to you. Ce = Cost of Equity. B = Beta. (Rm Cp = Cost of Equity Premium. Cost of Debt.

Discounted Cash Flow 52

Discounted Cash Flow Terminal Value Weighted Average Cost of Capital Net Present Value 52

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).

Risk Premium 99

Risk Premium Risk-free Rate Start-ups Equity 99

Musings on Markets

MARCH 25, 2021

for the year are at war with its concurrent promise to keep rates low; after all, adding those numbers up yields a intrinsic risk free rate of 8.7%. The Stocks Story As treasury rates have risen in 2021, equity markets have been surprisingly resilient, with stocks up during the first three months.

Equity 52

Equity Risk-free Rate Treasury Start-ups 52

Musings on Markets

FEBRUARY 6, 2025

I am no expert on exchange rates, but learning to deal with different currencies in valuation is a prerequisite to valuing companies.

Risk Premium 69

Risk Premium Start-ups Enterprise Value Equity 69