Musings on Markets

SEPTEMBER 27, 2022

In a third post on July 1, 2022 , I pointed to inflation as a key culprit in the retreat of risk capital, i.e., capital invested in the riskiest segments of every market, and presented evidence of the impact on risk premiums (bond default spreads and equity risk premiums) in markets.

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Risk Premium Treasury Start-ups Equity 99

Musings on Markets

JANUARY 20, 2021

Note that nothing that I have said so far is premised on modern portfolio theory, or any academic view of risk premiums. It is true that economists have researched risk aversion for centuries and concluded that investors are collectively risk averse, and that the level of risk aversion varies across age groups, income levels and time.

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Risk Premium Risk-free Rate Equity Dividends 52

Valutico

FEBRUARY 27, 2024

Key takeaways: The discount rate is primarily used by central banks to manage the economy and investors to calculate the present value of future cash flows from an investment. Investment Discount Rate: In investment analysis, the discount rate is employed to calculate the present value of future cash flows.

Discounted Cash Flow 52

Discounted Cash Flow Risk Premium Risk-free Rate Beta 52

Musings on Markets

AUGUST 15, 2023

By the same token, an investment that delivers a guaranteed return over ten years will not be risk free to an investor with a six month time horizon. Expected returns for Risky Investments : The risk-free rate becomes the base on which you build to estimate expected returns on all other investments.

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Risk-free Rate Treasury Risk Premium Start-ups 98

ThomsonReuters

MAY 6, 2021

A discounted cash flow approach is a type of “income approach” or “present value technique,” two terms used frequently in the FASB Accounting Standards Codification®. The adjustment added to the risk-free rate to arrive at the risk-adjusted rate is often referred to as the “risk premium.”

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Discounted Cash Flow Risk-free Rate Risk Premium Intangible Assets 52

Musings on Markets

JANUARY 30, 2023

Just as rising equity risk premiums push up the cost of equity, rising default spreads push up the cost of debt of companies, with the added complication of higher default risk for those companies that had pushed to the limits of their borrowing capacity in a low interest-rate environment. in 2022, higher than the 1- 1.5%

Treasury 98

Treasury Start-ups Risk Premium Equity 98

ThomsonReuters

APRIL 7, 2021

Financial statement presentation. As you prepare your financial projections ahead of submitting your loan application package or investor presentation, you want to avoid gaps that require explanation, as they tend to suggest weaknesses in your business. Financial statements are the next step in trying to put a number on your worth.

Risk Premium 71

Risk Premium Business Valuation Equity 71

Valutico

DECEMBER 12, 2023

The logical structure and cleaner aesthetic enhance the presentation of results, all while preserving the customization features that provide the ability to white label your reports. The customization options ensure that your unique insights can be presented in a format that aligns with your preferences and brand identity.

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Risk-free Rate Risk Premium Market Risk Marketability 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). The DDM is more grounded because it’s based on the company’s actual distributions and potential future value.

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Dividends Terminal Value Enterprise Value Equity 64

Musings on Markets

JANUARY 9, 2021

The Data As more data has become publicly available, and access to the data becomes easier, the challenge that we face in investing and valuation is that we often have too much data, and information overload is a clear and present danger.

Risk Premium 52

Risk Premium Market Capitalization Equity Start-ups 52

Valutico

AUGUST 10, 2023

Discounted Cash Flow (DCF) Method: DCF, a method that calculates the present value of future cash flows, can be challenging to apply to SMEs due to data reliability and future projection issues. SMEs, with their unique structures, present specific challenges that can significantly influence their value.

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Discounted Cash Flow Asset-based Approach Intangible Assets Business Valuation 52

Valutico

SEPTEMBER 13, 2023

SMEs can present challenges with DCF due to limited historical financial data, unreliable information, inadequate financial forecasts, and difficulty in determining terminal value. Approximations, negotiations, and considering illiquidity premiums help mitigate these challenges. Why Are SME Valuations So Unique and Challenging?

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Discounted Cash Flow Comparable Company Analysis Asset-based Approach Intangible Assets 52

Equilest

MARCH 17, 2022

Methods of business valuation by their profitability are presented below. Presentation of the profitability method to evaluate a company Attractions and limits of the method of multiples to value a company How to conduct a company valuation based on profitability? 11% per year. 10% per year.

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Business Valuation EBIT Discounted Cash Flow EBITDA 40

Simply Treasury

AUGUST 2, 2022

The definition of "net equity" is as follows: equity of the company = sum of subscribed capital, share premiums, revaluation reserves, reserves and retained earnings, minus the tax value of the company's holdings in associated companies and the tax value of its own shares. risk premium if the company is an SME as defined by European law).

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Equity Risk Premium Banking Finance 52

Musings on Markets

JANUARY 26, 2023

In this section, I will begin by looking at the evolution of my Tesla value from 2013 to 2021, and then present my updated valuation of the company. My Tesla History I have valued Tesla multiple times over the last decade, and while I have been wrong at each turn, I have tried to learn from my mistakes.

Start-ups 99

Start-ups Marketability Risk Premium Equity 99

Andrew Stolz

MARCH 20, 2020

The formula implies the return an investor expects from a risk-free investment plus the return from the stock in relation to market volatility. The market risk premium is calculated from a market rate of return less a risk-free rate. Lower WACC can increase the present value of a firm.

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Valutico

OCTOBER 20, 2022

The DCF method takes the value of the company to be equal to all future cash flows of that business, discounted to a present value by using an appropriate discount rate. A discount rate, or discount ‘factor’, is calculated and applied to each year’s cash flow, in order to arrive at the present value. . Does this make sense?

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

Appraiser Newsroom

MAY 1, 2024

Insurance industry terminology such as risk, premium, loss, deductibles, coverage limits, and perils are some of the fundamental concepts appraisers must grasp. Register for ASA’s PP163 Property Insurance Fundamentals: What Appraisers Need to Know webinar on June 6, 2024 from 2:00-3:00 PM EDT, presented by Thomas Dawson, ASA.

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Chris Mercer

MARCH 7, 2024

” The hypothetical valuation presented in Mercer’s Musings #2 and “solved” in Mercer’s Musings #3 considered a significant number of factors in developing marketability discounts for two dissimilar, 10% interests in two identical companies. We do so in the context of alternative returns for similar investments.

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Dividends Appraisal Terminal Value Business Valuation 52

Equilest

JULY 10, 2023

The income approach focuses on estimating the present value of expected future cash flows. Market volatility, regulatory changes, interest rate fluctuations, tenant turnover, and project-specific risks are examples of factors that can impact a company's value. The asset-based approach assesses the company's net asset value.

Business Valuation 40

Business Valuation Asset-based Approach Risk Premium Price to Earnings 40

Equilest

JULY 10, 2023

The income approach focuses on estimating the present value of expected future cash flows. These factors include market volatility, interest rate fluctuations, regulatory changes, tenant turnover, and property management risks. Common approaches include the income approach, market approach, and asset-based approach.

Business Valuation 40

Business Valuation Asset-based Approach Risk Premium Price to Earnings 40

Equilest

JULY 10, 2023

Market volatility, regulatory changes, interest rate fluctuations, environmental concerns, and construction risks are some examples of factors that can impact a business's value. Assessing and quantifying these risks helps determine an appropriate discount rate or risk premium when calculating the business's present value.

Business Valuation 40

Business Valuation Risk Premium Marketability Finance 40

Appraiser Newsroom

JUNE 4, 2024

Don’t miss these industry experts presenting our Business Valuation sessions*: Vanessa Brown Claiborne | ASA, CPA/ABV, AEP | Chief Executive Officer & President, Shareholder | Chaffe and Associates Ms. She has authored articles and presented on valuation topics for numerous organizations.

Business Valuation 59

Business Valuation Intangible Assets Appraisal Finance 59

Equilest

JUNE 10, 2023

This method considers the projected cash flows generated by the tax preparation business and applies an appropriate capitalization or discount rate to determine the present value. Factors such as multiples, beta, and equity risk premium are required for accurate calculations.

Business Valuation 40

Business Valuation Fair Market Value Marketability Technology 40

Equilest

JUNE 13, 2023

Methods such as discounted cash flow (DCF) analysis and capitalization of earnings are commonly used to determine the present value of expected future cash flows. Factors such as multiples, beta, and equity risk premium are required for accurate calculations.

Business Valuation 40

Business Valuation Asset-based Approach Appraisal Intangible Assets 40

Musings on Markets

JANUARY 12, 2021

I also offer online classes in basic finance (present value, risk models and measures) and accounting (or at least my version of it) as background to my main classes. By the end of the class, my objective is not to sell you on the best philosophy but to provide you with a framework where you can find the philosophy that best fits you.

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Corporate Finance Start-ups Finance Marketability 52

Musings on Markets

JANUARY 19, 2022

In computing this implied equity risk premium for the S&P 500, I start with the dividends and buybacks on the stocks in the index in the most recent year (which is known) and assume that they grow at the rate that analysts who follow the index are projecting for the next five years.

Risk Premium 99

Risk Premium Risk-free Rate Start-ups Equity 99

Musings on Markets

JANUARY 8, 2022

Risk Premiums : You cannot make informed financial decisions, without having measures of the price of risk in markets, and I report my estimates for these values for both debt and equity markets. I extend my equity risk premium approach to cover other countries, using sovereign default spreads as my starting point, at this link.

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Risk Premium Start-ups Market Capitalization Corporate Finance 99

Musings on Markets

FEBRUARY 16, 2024

Investors will either see more relative risk (or beta) in these companies, if the risks affect an entire sector, or in equity risk premiums, if they are market-wide. Applications : My argument for using implied equity risk premiums is that they are dynamic and forward-looking.

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Risk Premium Start-ups Beta Marketability 78

Musings on Markets

MARCH 28, 2022

Risk Surge and Economic Viability : In my last post, I noted the surge in Russia's default spread and country risk premium, making it one of the riskiest parts of the world to operate in, for any business.

Start-ups 118

Start-ups Alpha Marketability Risk Premium 118

Musings on Markets

FEBRUARY 27, 2023

An Optimizing Tool In my second and third data posts for this year, I chronicled the effects of rising interest rates and risk premiums on costs of equity and capital. In computing the latter, I used the current debt ratios for firms, but made no attempt to evaluate whether these mixes were "right" or not.

Equity 52

Equity EBITDA Start-ups Net Debt 52

Musings on Markets

APRIL 20, 2025

In this post, I will posit that contrarian investing can take different forms, each based on different assumptions about market behavior, and present the evidence that we have on the successes and failures of each one. Contrarian Investing: The Psychological Tests!

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Start-ups Price to Book Marketability Equity 136

Equidam

APRIL 22, 2025

.” De-Risking the Future: The Role of Current Traction, Team, and Milestones If valuation is about the future, what role does the present play? 4] [6] [14] [15] [16] [18] This present-day evidence serves a crucial function: it de-risks the future vision being presented to investors.

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Discounted Cash Flow Marketability Risk Premium Start-ups 52

Equidam

APRIL 22, 2025

17] Ideally, it reflects the present worth of the future cash flows the business is expected to generate, or is based on other core attributes like assets, intellectual property, and market position. [17] 8] , [9] The potential exit value is then discounted back to its present value using this required ROI as the discount rate.

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Discounted Cash Flow Terminal Value Marketability EBITDA 64

Reynolds Holding

FEBRUARY 23, 2025

Regulatory changes introduce uncertainty, and their effects are further confounded by the ever-present unpredictability of markets even known variations, whether from unpredictability in inflation and interest rates driven by the Fed, or the basic requirements for capital-raising and deployment set by the SEC equate to risk.

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Systematic Risk Marketability Equity Risk Premium 45