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9 Startup Valuation Methods: 5 to Use, 4 to Avoid

Equidam

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. This incorporates the risk-free rate, a market risk premium specific to the company’s country, and Beta ($beta$).

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Discount Rate—Explanation, Definition and Examples

Valutico

Capital Asset Pricing Model (CAPM): According to CAPM, the expected return on a stock has two main components: the risk-free rate and a risk premium. The risk-free rate represents the return an investor can get without taking on any risk, typically derived from government bonds.

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What is the Capital Asset Pricing Model (CAPM)?

Andrew Stolz

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. What Impacts the Capital Asset Pricing Model?

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Data Update 4 for 2021: The Hurdle Rate Question!

Musings on Markets

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. as mature markets. What is a hurdle rate for a business? for Ford).

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Startup Valuation: The Ultimate Guide for Founders

Equidam

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]

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Startup Valuation: The Ultimate Guide

Equidam

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.,