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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 riskpremium specific to the company’s country, and Beta ($beta$).
Factors to consider A number of factors may be appropriate to consider in valuing partial ownership interests. The purpose and definition of the valuation engagement in accordance with BVS–I General Requirements for Developing a Business Valuation, including the applicable standard (type) and premise of value.
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] [4] It’s an exercise in assessing potential [6] , requiring investors to place bets on a future that is, by definition, uncertain. [14] Discount Rates / RiskPremiums: The discount rate used in DCF analysis (often the WACC) incorporates elements sensitive to market conditions. [21] 2] [15] [17].
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