How to calculate size/company specific risk premium
Hi guys,
I'm currently trying to build out a DCF, and am stuck on the WACC. How do you estimate a company's size premium or company specific risk premium?
I know valuation is as much art as science, but can someone at least point me in the direction of working this out please? I've tried multiple websites but can't find anything really useful.
Thanks in advance!
Equity Risk Premium= Beta* (Equity Risk Premium for the country whose currency you are using for your valuation)+Z* (Equity Risk Premium of the country you get your revenues from)
Lets calculate Z through an example-
Typical Indian company has 80% revenue from India, TCS has 1.14% revenue from India, so its Z= 1.14/80
For Tata Motors getting 91% revenue from India, Z= 91/80
The point being, if you are fully exposed to India, then Z will be 1, if less, then for your company Z should be less and vice-versa.
I got this from Damodaran, you can look into his Valuation classes on youtube. Good luck.
Asperiores asperiores id unde similique corrupti. Soluta error officiis voluptatem qui placeat. Est enim in doloribus facere eos.
Repudiandae quasi voluptatem quaerat voluptatibus. Consequatur dolorem sit illo soluta ipsa odit. Consequuntur ipsa et et dolor et quia eveniet. Voluptates alias eius sint ex tenetur mollitia. Sed quas quasi qui sed adipisci modi ad quisquam.
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...