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Strategies & Market Trends : Free Cash Flow as Value Criterion -- Ignore unavailable to you. Want to Upgrade?

To: Pirah Naman who wrote (143)	11/4/1997 6:00:00 PM
From: Reginald Middleton	Read Replies (1) \| Respond to of 253

I apologize if I offended you, I repsonded to what you posted, and not necessarily what you know. I stand corrected. As for what you posted, <Disregarding the fact that there is no such thing as a riskless asset (it is a modeling assumption)> One must operate on a base of assumptions. You do so every time you use a number in a calculation. US federal treasury debt has never defaulted nor has it ever lagged in coupon payments, and is the closest to a riskless asset that we can get. <), the potential investor in Intel does not have an alternative riskless asset that yields 13% while the same potential buyer of Microsoft has an alternative riskless asset that yields 11%.> That is why you must apply the specific premium to the riskless asset rate that the market has given the asset that you are trying to value. This is widely available in the publicly traded equity markets of developed nations. Once the market's stated risk premium is applied, one has adjusted the risky asset to the equivalent of a riskless asset. It is this point that, according to your posts, you seem to be overlooking. The market sets prices, and therefore sets premiums. There is at least fifty years of valid market data to call on in order to derive the risklees asset equivalent discount rate of nearly any publicly (US) traded asset.