Re-evaluating discount rates in a distressed economy
Abstract: Investors require a certain return for taking on the risk of investing in a business. Valuators measure risk using discount (and capitalization) rates and measure return using future income streams. Estimating discount rates is a complex task, even in the best of times. But the volatile economy has forced valuators to re-evaluate traditional methods of quantifying discount rates. This article discusses some of the issues facing valuators as they estimate discount rates in the current business climate.