Remove EBITDA Remove Risk Premium Remove Weighted Average Cost of Capital
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9 Startup Valuation Methods: 5 to Use, 4 to Avoid

Equidam

revenue multiple, ARR multiple, EBITDA multiple) derived from recent acquisitions or funding rounds of supposedly similar companies. Discount Rate (Cost of Equity): The rate used to discount future cash flows reflects the riskiness of the investment. We calculate the cost of equity using the Capital Asset Pricing Model (CAPM).

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Discounted-Cash-Flow-Analysis: Your Complete Guide with Examples

Valutico

d is the discount rate (which is usually the weighted average cost of capital (WACC), r in our previous example). Some practitioners will use an average of both methods. . Ce = Cost of Equity. Rf = Risk-free Rate. Rm – Rf) = Equity Market Risk Premium. Cp = Cost of Equity Premium.

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Startup Valuation: The Ultimate Guide for Founders

Equidam

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].