July 2009
Intermediate to advanced
600 pages
19h 50m
English
book
The Dark Side of Valuation: Valuing Young, Distressed, and Complex Businesses, Second Edition
by Aswath Damodaran
Content preview from The Dark Side of Valuation: Valuing Young, Distressed, and Complex Businesses, Second Edition
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Why Do Risk-Free Rates Matter?
The risk-free rate is the building block for estimating both the cost of equity and capital. The cost of equity is computed by adding a risk premium to the risk-free rate, with the magnitude of the premium being determined by the risk in an investment and the overall equity risk premium (for investing in the average risk investment). The cost of debt is estimated by adding a default spread to the risk-free rate, with the magnitude of the spread depending on the credit risk in the company. Thus, using a higher risk-free rate, holding all else constant, increases discount rates and reduces present value in a discounted cash flow valuation.
The level of the risk-free rate matters for other reasons as well. As the ...
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O’Reilly covers everything we've got, with content to help us build a world-class technology community, upgrade the capabilities and competencies of our teams, and improve overall team performance as well as their engagement.Julian F.
I wanted to learn C and C++, but it didn't click for me until I picked up an O'Reilly book. When I went on the O’Reilly platform, I was astonished to find all the books there, plus live events and sandboxes so you could play around with the technology.Addison B.
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I'm always learning. So when I got on to O'Reilly, I was like a kid in a candy store. There are playlists. There are answers. There's on-demand training. It's worth its weight in gold, in terms of what it allows me to do.