Oceňování 2019, 12(2):14-28 | DOI: 10.18267/j.ocenovani.229
Market value of a business and discount rate focusing on the capital market risk premium - part 1
- 1 Prof. Ing. Miloš Mařík, CSc., Katedra financí a oceňování podniku VŠE Praha, ředitel Institutu oceňování majetku VŠE Praha
- 2 Doc. Ing. Pavla Maříková, CSc., Katedra financí a oceňování podniku VŠE Praha
The objective of the article is to seek an answer to the question of how to estimate the cost of equity and, in particular, the risk premium of the capital market for income methods within estimation of the market value of a business. In current valuation practice, the use of historical capital market premiums predominates significantly. However, this procedure is neither theoretically consistent with the CAPM model nor fully consistent with the market value concept. The issue of how to use market data and market expectations for the future has long been addressed by some Western authors. In doing so, they concluded that the most appropriate would be based on normal income models for the valuation of shares, from which we can estimate the required return on the principle of the future internal yield percentage. After deducting risk-free rate, we then obtain an ex-ante risk premium estimate. These models exist in several variants. This first part of the article discusses a group of models based on dividends and FCFE. The second part of the article will deal with models based on residual profits. In the future, we would like to reach estimates of risk premiums directly for central European conditions, because the ex-ante approach opens the way for this.
Keywords: Value; business valuation; market value; cost of equity; ex-ante market risk premium; implied risk premium
Grants and funding:
Článek je zpracován jako jeden z výstupů výzkumného projektu Fakulty financí a účetnictví VŠE Praha, který je realizován v rámci institucionální podpory VŠE IP100040
JEL classification: G32
Published: October 25, 2019 Show citation
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