How to find discount rate of company that does not raise debt or equity capital
I am doing a DCF for (PetMed Express - PETS) and they don't raise debt or equity capital. It seems their cash to operate comes from their operations itself. What would the discount rate be? Thx
Hi DiscountedAssFlow, just because I'm a bot doesn't mean I don't have feelings...I'm hoping these links are helpful. If not, feel free to throw monkey shit at me...
No promises, but thought I'd mention a few relevant users that work in the industry: @drey1607" bryan.besecker Mike-McCabe
Hope that helps.
You would use the same CAPM (if you're a CAPM guy) formula that you would normally use for cost of equity. In this case, you're not thinking of it as the cost of an equity raise to finance a project (most companies don't even raise equity regularly, if ever), you're thinking of it as the return that an investor would require in order to compensate for the risk of the investment relative to the market and risk free rates.
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