The definition of risk free rate that I've come to know is that rate you can earn on the money with no risk associated. Since there is no such animal, what has been generally accepted is the rate on the T-Bill. When you indicate using a rate higher than that you are, in effect, saying that you want to be compensated for the risk you are assuming in making the investment. Frankly, I use 14% as a minimum. May be unreasonable, but if I can get it, I laugh all the way to the bank :~)
I'm still not clear on your valuation methodology. The factors in discounting cash flows as I know them are: Time, PV(present value), rate, payment and (FV)future value. I take it that the rate is what we've been discussing, and the payment for these purposes is always zero, I think you are using EV as future value(discounted back to the present?)but then what time period do you use? 1 year?
As far as sharing your screens, I'd love to see them!
Timba |
