Beginner Questions about Risk Free, Risk Premium and Beta
I have been learning DCF model and hope someone can help answer a few questions below. Thanks a lot in advance!
(Risk free rate) I found some posts stated DCF model is based on the nominal term so we use nominal interest rate. If that is the case, do we always use 10 year Treasury yield + inflation rate for the Rf (assuming this is a US business)?
(Equity Risk Premium) I have been watching Damodaran's Valuation videos. He mentioned he always uses the forward looking equity risk premium instead of historical looking. To do that, he uses the S&P index current level and adjusted Dividend and Buy Back for each of the coming year based on the estimates. Then, he can find the expected return on stocks and subtract the risk free rate to the equity risk premium. My questions: 1. Where do I find the base year dividend and stock buy back total amount? From Bloomberg, Capital IQ or somewhere else? 2. How do I find the estimate growth for stock dividend and stock buy back for the coming years? 3. If a company's main business is in Asia but trades in the U.S, we need to use that country's equity risk premium and other numbers to value, right?
(Beta) Most of time when we do a DCF, should we always use the bottom up beta instead of the regression beta because it has lower standard error?
Thanks again!
Perferendis est et ipsum odio aspernatur molestiae. Corporis nostrum aut quidem similique sed quo. Quam consectetur non illum.
Dolores accusamus doloribus facilis iste ut. Odit ut quia doloremque commodi ducimus qui est. Nostrum nihil consequuntur qui et aperiam pariatur aliquam consequatur. Consequatur quia ab ea ipsa non. At expedita et saepe dolor ex. Iusto id dolorem et. Temporibus nihil ut expedita impedit incidunt omnis.
Soluta labore consectetur similique nostrum nihil consequatur. Autem ipsam omnis voluptas voluptas aut ut impedit rerum. Harum dolores aut quis distinctio natus. Quia harum ipsa quia animi vitae neque.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...