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Discount Rate Myth 4: The Discount Rate is the receptacle for all your hopes and fears
Published 2 weeks, 1 day ago
Description
In this session, the fourth of five on the discount rate myths, I look at how analysts and appraisers use the discount rate as a receptacle for all their hopes and fears. Specifically, they try to lower (raise) discount rates for well managed (badly managed) companies and to raise discount rates to capture any risks that they see on the horizon. The discount rate in a DCF is a blunt instrument and is designed more for carrying continuous, going-concern risk than discrete and estimation risks.
Slides: http://www.stern.nyu.edu/~adamodar/pdfiles/blog/DiscountRateMyth4.pdf
Blog Post: http://aswathdamodaran.blogspot.com/2016/11/myth-44-ddiscount-rate-is-receptacle.html
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