Should business valuators use ‘implied’ equity risk premiums? Damodaran says yes

BVWire–UKIssue #4-2
July 16, 2019

cost of capital
cost of capital, discount rate, private company valuation, risk analysis, Aswath Damodaran, cost of equity, equity risk premium (ERP)

The free, 11th annual update to ‘Equity Risk Premiums (ERP): Determinants, Estimation and Implications—The 2019 Edition’ is now available from Professor Aswath Damodaran (New York University Stern School of Business). Damodaran continues to be a strong proponent of the use of the ex ante approach, or ‘implied’ ERPs, which are forward-looking estimates that are extracted by examining stock prices today and expected cash flows in the future (rather than the ex post approach using historical information). Damodaran’s implied ERPs are one of the options available in BVR’s Cost of Capital Professional online platform for estimating the cost of equity.
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