Discount Rates and Corporate Valuation

Abstract

This paper presents a conceptual framework and comprehensive set of valuation relations - cash flow and discount rate expressions - for use in corporate valuation. I examine the implications of assets with differential systematic risk exposure (e.g., excess vs. operating assets) and of different financial policies (e.g., static vs. dynamic) for valuation relations. The results should be useful to academics and practitioners.

Keywords: Corporate valuation, capital structure, cost of capital

JEL Classification: G30