So I'm trying to value a weird, very niche investment. Can't go into details, sorry, but I hope my question below is self-explanatory.
Imagine a 20-year investment which gives a company guaranteed, risk-free returns but only if the company has taxable profits. These returns are in the form of cash flows, and you get a majority of your investment back within 2-3 years. The rest of the cash flows are spread out over the 20-year period.
What discount rate would you use to value these cash flows?
| +249 | Why UBS Is the Worst Place to Start Your IB Career | 36 | 5h |
| +158 | UBS 2nd Year Analyst Q&A (2026) | 27 | 2m |
| +68 | Firm Thinks I'm Lying About Offer | 20 | 1d |
| +60 | Indiana University Fraternity Pipelines | 36 | 10h |
| +50 | Rogo AI | 20 | 1d |
| +49 | Elite Boutique interview questions | 14 | 35m |
| +45 | Suspended for a Year | 19 | 19h |
| +39 | Stay at Weak Dealflow Team or Lateral? | 12 | 2d |
| +24 | What's your craziest "hardo" story? | 3 | 1d |
| +23 | 1st Half 2026 (1H26) RX IB & RX Co. Rankings | 16 | 23h |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
Good question. I need to determine a "fair valuation" irrespective of this particular company's status. That said, this and most companies in this sector are fairly profitable, have stable revenues, and the sector is mature. But 20 years is a long time and profitability can't be a guarantee over that period.
Voluptas dolorum earum deleniti mollitia aut. Officiis est sed amet impedit neque. Quis reiciendis ratione quibusdam asperiores ut.
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...