Valuers should lower equity risk premium component of discount rate

Business Valuation UpdateVol. 9 No. 11
November 2003
Shannon P. Pratt, CFA, ARM, ABAR, FASA, MCBA, CM&AA

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cost of capital, discount rate, cost of equity, ibbotson associates, equity risk premium (ERP)

Summary

I am now convinced that the long-term arithmetic average general equity risk premium (currently 7.0%) is too high.