Hi. What do you think about using 30-year treasury bond rate as riskfree rate in calculating cost of equity? Or using average riskree rate, not current. Especially for calculating terminal value it seems reasonable to me. Current riskfree rate is temporary and can be volatile. When I am discounting cash flows to infinity, why not to use riskfree rate that is more sustainable? No too low, or too high...
Stacey Warren - Expert brainly.com
Hey! We 've verified this expert answer for you, click below to unlock the details :)
At vero eos et accusamus et iusto odio dignissimos ducimus qui blanditiis praesentium voluptatum deleniti atque corrupti quos dolores et quas molestias excepturi sint occaecati cupiditate non provident, similique sunt in culpa qui officia deserunt mollitia animi, id est laborum et dolorum fuga.
Et harum quidem rerum facilis est et expedita distinctio. Nam libero tempore, cum soluta nobis est eligendi optio cumque nihil impedit quo minus id quod maxime placeat facere possimus, omnis voluptas assumenda est, omnis dolor repellendus.
Itaque earum rerum hic tenetur a sapiente delectus, ut aut reiciendis voluptatibus maiores alias consequatur aut perferendis doloribus asperiores repellat.
I got my questions answered at brainly.com in under 10 minutes. Go to brainly.com now for free help!
Unlike the other inputs into valuation, the riskfree rate represents a real opportunity cost: what you can make if you invest your money in a riskfree investment today. Thus, you should always use today's riskfree rate in valuation, since that represents your opportunity cost.
Proff Damodaran,in your book I've read about risk-free rate. You said, that we can also use the rate of 20 or 30 year maturity bonds, but the only problem is less availability on data for this bonds, than 10 years.