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Strategies & Market Trends : Due Diligence - How to Investigate a Stock
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To: Zeev Hed who wrote (504)5/30/1999 12:10:00 PM
From: Chuzzlewit  Read Replies (1) of 752
 
Zeev, I used to use a similar approach. I took the 30 year US bond rate as a base, and then added an assumed risk premium based on my subjective reading of the situation, and the nature of the business. This gave me a hurdle rate which I then applied to free cash flows derived from the business plan.

One major problem, of course, is that nobody has good forecasts that extend out past a year or two, and asking to include cash-flows 10 years out in a valuation model is quite dicey. But what's the alternative?

TTFN,
CTC
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