Valutico

FEBRUARY 27, 2024

The discount rate effectively encapsulates the risk associated with an investment; riskier investments attract a higher discount rate. Different types of discount rates such as risk-free rate, cost of equity, or cost of debt, are used contextually in financial analysis.

Discounted Cash Flow 52

Discounted Cash Flow Risk Premium Risk-free Rate Beta 52

Andrew Stolz

AUGUST 5, 2020

Definition of Capital Asset Pricing Model. It helps an investor understand what to expect to earn in relation to the risk-free rate and the market return. CAPM assumes that the minimum a rational investor would earn is the risk-free rate by buying the risk-free asset.

Risk-free Rate 52

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

Brian DeChesare

AUGUST 31, 2022

But before delving into the best candidates for these roles, typical trades, careers, and more, let’s start with the basic definitions: What is a Convertible Arbitrage Hedge Fund? The risk-free rate is higher – because investors benefit from “delaying” their eventual purchase of the underlying shares when they earn higher interest elsewhere.

Banking 89

Banking Risk-free Rate Equity Start-ups 89

Musings on Markets

FEBRUARY 10, 2021

What is a hurdle rate for a business? There are multiple definitions that you will see offered, from it being the cost of raising capital for that business to an opportunity cost , i.e., a return that you can make investing elsewhere, to a required return for investors in that business.

Risk-free Rate 52

Risk-free Rate Risk Premium Start-ups Equity 52

Equidam

APRIL 26, 2025

Valuation as a Process, Not Just a Number A common misconception is that startup valuation aims to pinpoint a single, definitive “right” number representing the company’s price. Discount Rate (Cost of Equity): The rate used to discount future cash flows reflects the riskiness of the investment.

Discounted Cash Flow 59

Discounted Cash Flow Terminal Value Book Value Beta 59

Equidam

APRIL 22, 2025

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 Risk Premium. [23] 23] Risk-Free Rate: Tied to government bond yields (e.g.,

Discounted Cash Flow 64

Discounted Cash Flow Terminal Value Marketability EBITDA 64

Equidam

APRIL 22, 2025

6] The valuation represents the market’s expectation of future performance, growth, and eventual returns. [1] 1] [4] It’s an exercise in assessing potential [6] , requiring investors to place bets on a future that is, by definition, uncertain. [14] This premium rises when perceived market risk increases. [27]

Discounted Cash Flow 52

Discounted Cash Flow Marketability Risk Premium Start-ups 52