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

Simply Treasury

AUGUST 2, 2022

DEBRA Proposal (« Debt-Equity Bias Reduction Allowance). In early May, the European Commission unveiled its proposal for a "DEBRA" (Debt-equity bias reduction allowance) Directive, aimed at encouraging companies to finance their investments with equity and capital contributions, instead of resorting to loans (bank or other).

Equity 52

Equity Risk Premium Banking Finance 52

Musings on Markets

FEBRUARY 15, 2023

One is to compute the taxes you would have paid on operating income, if it had been fully taxable, to get after-tax operating income and margin , and the other is to add back depreciation to operating income to get EBITDA and EBITDA margin.

Start-ups 52

Start-ups Equity Risk Premium Risk-free Rate 52

Brian DeChesare

MAY 3, 2023

And it values the company today based on the present value of its dividends and that potential future value (either the stock price or the Equity Value via the Terminal Value calculation). And Equity Real Estate Investment Trusts (REITs) must distribute almost all their Net Income, so the DDM can work well in REIT valuations.

Dividends 64

Dividends Terminal Value Enterprise Value Equity 64

Musings on Markets

JANUARY 26, 2023

Tesla's rise is summarized in the graph below, where we look at the company's revenues and earnings over time, with earnings measured in gross and operating terms, and EBITDA capturing operating cash flows: 2022 numbers updated to reflect 4th quarter earnings call on 1/25/23 Between 2010 and 2020, Tesla grew revenues from $117 million to $31.5

Start-ups 99

Start-ups Marketability Risk Premium Equity 99

Valutico

OCTOBER 20, 2022

Practitioners assume the business is sold as a multiple of some financial metric like EBITDA, based on what they can see today for other businesses that were sold, and what these comparable trading multiples are. . Ce = Cost of Equity. Rf = Risk-free Rate. Rm – Rf) = Equity Market Risk Premium.

Discounted Cash Flow 52

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

Musings on Markets

JANUARY 28, 2024

In my last data updates for this year, I looked first at how equity markets rebounded in 2023 , driven by a stronger-than-expected economy and inflation coming down, and then at how interest rates mirrored this rebound.

Risk Premium 121

Risk Premium Beta Start-ups Equity 121

Musings on Markets

JULY 27, 2022

grow at the cost of equity), yielding about ?46 And no, you cannot add back stock based compensation and come up with an adjusted EBITDA to claim otherwise.) The effects of inflation show up first as higher risk free rates , across currencies, and next in higher risk premiums, with both equity risk premiums and default spreads rising.

Risk Premium 98

Risk Premium Start-ups Equity Marketability 98

Musings on Markets

MARCH 19, 2022

In this section, I will begin by looking at the bond market effects and then move on to equities and other asset classes, starting by looking at the localized reaction (for Ukranian and Russian securities) and then the global ripple effects. As Russian equities have imploded, the ripple effects again are being felt across the globe.

Start-ups 100

Start-ups Risk Premium Equity Market Capitalization 100

Musings on Markets

FEBRUARY 27, 2023

To fund the business, you can either use borrowed money (debt) or owner's funds (equity), and while both are sources of capital, they represent different claims on the business. Even government-owned businesses fall under its umbrella, with the key difference being that equity is provided by the taxpayers.

EBITDA 52

EBITDA Equity Start-ups Net Debt 52

Musings on Markets

JULY 24, 2024

After the 2008 market crisis, I resolved that I would be far more organized in my assessments and updating of equity risk premiums, in the United States and abroad, as I looked at the damage that can be inflicted on intrinsic value by significant shifts in risk premiums, i.e., my definition of a crisis.

Risk Premium 77

Risk Premium Equity Start-ups EBITDA 77

Musings on Markets

APRIL 20, 2025

For the market, it is often built on papers (or books) that look at the historical data on what equity markets have delivered as returns over long periods, relative to what you would have made investing elsewhere. Contrarian Investing: The Psychological Tests! In the abstract, it is easy to understand the appeal of contrarian investing.

Start-ups 136

Start-ups Price to Book Marketability Equity 136

Equidam

APRIL 22, 2025

4] , [3] , [5] Unlike mature, publicly listed companies which are easier to compare using multiples of current earnings (like EBITDA) [3] , startups must be valued based on their projected future; moats, margins and the perceived strength of their future growth trajectory. [3] 3] Valuation serves as a critical input for decision-making.

Discounted Cash Flow 64

Discounted Cash Flow Terminal Value Marketability EBITDA 64

Equidam

APRIL 22, 2025

2] Startups typically lack significant historical financial data, often operate with negative profits initially, rely heavily on private equity or venture capital rather than traditional bank loans, and face a much higher risk of failure. [1] This premium rises when perceived market risk increases. [27] 2] [15] [17].

Discounted Cash Flow 52

Discounted Cash Flow Marketability Risk Premium Start-ups 52

Musings on Markets

FEBRUARY 6, 2025

The results, broken down broadly by geography are in the table below: As you can see, the aggregate market cap globally was up 12.17%, but much of that was the result of a strong US equity market. That process of risk analysis and estimating risk premiums starts by understanding why some countries are riskier than others.

Risk Premium 69

Risk Premium Start-ups Enterprise Value Equity 69