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Title: Problems in estimating a discount rate for valuing small enterprises.
Description: Problems in estimating a discount rate for valuing small enterprises. - analysis
Description: Problems in estimating a discount rate for valuing small enterprises. - analysis
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Problems in estimating a discount rate for valuing small enterprises
As it is seen from the current case, in order to find the present value of the projected company's
dividends, an appropriate discount rate has to be determined using the capital asset pricing model
(CAPM)
...
It is possible to “borrow” the beat from surrogate quoted companies operating in the same sector with
similar business risk
...
As mentioned previously, the beta of a company’s share reflects the risk of its equity and this depends
on the level of gearing
...
com, 2015) Consequently, differences in gearing levels between the
small firm and the comparable quoted company (see Appendix 2) can cause further complications
...
(acowtancy
...
Therefore it is not
necessary ungearing the beta
...
Consequently, there may be some inaccuracy when using “borrowed” beta in valuating
Nutec Ltd
...
However,
when valuing small, unquoted companies, the main problem is the lack of market values of debt and
equity, because neither of them is traded
...
, 2011)
Title: Problems in estimating a discount rate for valuing small enterprises.
Description: Problems in estimating a discount rate for valuing small enterprises. - analysis
Description: Problems in estimating a discount rate for valuing small enterprises. - analysis