Airport valuation: What discount rate to use?
I am valuating a public not-for-profit airport that is set for privatization. What discount rate can I use to do a DCF?
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I mean should I use CAPM, WACC, IRR, or make one up?
You run valuations from the perspective of the BUYER. If it's an open market investor, CAPM. For a M&A, WACC. For PE, you should have a target rate. IRR is good there. If all else fails, use the Rf Rate, then apply a haircut.
Valuating a not-for-profit airport subject to privatization. How should I approach this? (Originally Posted: 11/10/2017)
Hello,
I am assigned with valuating a state-owned (not for profit) airport that the government is contemplating privatizing. The airport has its financial statements up for the public.
I have already built an FCFF model, my questions are the following:
What discount rate to use? note that the airport is 100% debt financed
How should I approach relative valuation? There are no similar publicly traded airports to compare it with, i.e. I don't have the value of similar airports.
Thank you.
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