What is a sensible discount rate? Discount rates are affected by interest rates and business risk. Impact of Interest Rates Risk-free rate Lower interest rates result in lower discount rates, because businesses can borrow money cheaper. A proxy for interest rates can be the U.S. 10-year treasury note, which as of this writing is at 1.34%. …
The intrinsic value of a company or asset, such as real estate, is defined as the sum of the estimated future cash flows discounted back to today’s value using an appropriate discount rate.
What Is Valuation? As valuation expert Aswath Damodaran points out, “a postulate of sound investing is that an investor does not pay more for an asset than it is worth.” This means that before buying or selling shares of a company, we need to estimate how much the shares are worth. Two Types Of Valuation …
Read about the 5 steps of a discounted cash flow (DCF) analysis, and how you can apply them to value a company.
