RT Report
T1 Simultaneous determination of market value and risk premium in the valuation of firms
A1 Lutz, Stefan
AB Valuing a firm using the discounted cash flow method (DCF) requires the joint determination of the market value of its equity (MVE) together with the equity risk premium (ERP) the firm should earn, since the latter is part of the discount rate used in the calculation of the MVE.This paper presents a theoretical derivation of how MVE and ERP can be calculated simultaneously under fairly general conditions. Besides firm data on free cash flow to equitythe only external data needed are the risk-free rate of interest and a parameter indicating the required market risk premium per return volatility.
YR 2012
FD 2012-11
LK https://hdl.handle.net/20.500.14352/49121
UL https://hdl.handle.net/20.500.14352/49121
LA eng
NO JEL classification: G1, G3, M4
DS Docta Complutense
RD 9 jul 2025