Myth 4.5: DCFs break down with near-zero risk free rates!

In any version of a risk and return model for discount rates, where you start with a riskfree rate as a base and build up to costs of equity...

Myth 4.4: The D(discount) rate is a receptacle for your hopes and fears

In discounted cash flow valuation, discount rates are the instruments that we use to adjust for the risk in cash flows. In practice, discoun...

Myth 4.3: The D cannot change (over time) in a DCF

In my last post, I argued that academics and practitioners pay too much attention to discount rates in valuation and too little to cash flow...

Myth 4.2: It's all about D in the DCF

If you have taken a class on valuation, think back to what you spent most of your time doing and I will wager you spent it talking about dis...

Myth 4.1: If you don't like betas (or modern portfolio theory),you cannot do a DCF!

Let’s start by stating the obvious. You need a D(iscount rate) to do D(iscounted) C(ash) F(low) valuation. To get that discount rate, I use ...

The Small Cap Premium: Where is the beef?

For decades, analysts and investor have bought into the idea of a small cap premium, i.e., that stocks with low market capitalizations can b...