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Market value of a business and discount rate focusing on the capital market risk premium - part 2
[Tržní hodnota podniku a diskontní míra se zaměřením na rizikovou prémii kapitálového trhu - 2. část]

Author

Listed:
  • Miloš Mařík
  • Pavla Maříková

Abstract

In the first part of the article models for ex-ante market risk premium estimation based on dividends and free cash flow were analyzed. The aim of this second part is to introduce and analyze models based on residual profits, evaluate various models and submit recommendations for the Czech Republic's conditions. The use of the residual profit model is also illustrated by a model example and empirical data obtained by these models are presented. The article concludes that models based on residual profits are more suitable for practical use in Central European conditions than models based on dividends, FCFE or earnings. Residual profits require input data that is relatively easy to obtain while being economically equivalent to free cash flow models. We recommend especially the Claus - Thomas model, which works with long - term growth.

Suggested Citation

  • Miloš Mařík & Pavla Maříková, 2019. "Market value of a business and discount rate focusing on the capital market risk premium - part 2 [Tržní hodnota podniku a diskontní míra se zaměřením na rizikovou prémii kapitálového trhu - 2. čás," Oceňování, Prague University of Economics and Business, vol. 12(3), pages 18-33.
    • Handle: RePEc:prg:jnloce:v:12:y:2019:i:3:id:2019_3_02:p:18-33
    DOI: 10.18267/j.ocenovani.233
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    Keywords

    Value; Business valuation; Market value; Cost of equity; Ex-ante market risk premium; Implied risk premium; Hodnota; Ocenění podniku; Tržní hodnota; Náklady vlastního kapitálu; Riziková prémie kapitálového trhu ex-ante; Implikovaná riziková prémie;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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