Step 6 to Reviewing a Valuation Report – Discount Rate Reasonableness

Damage Quantification

Step 6 to Reviewing a Valuation Report – Discount Rate Reasonableness

Is the valuation based on a going concern income-based approach such as a discounted cash flow approach (DCF) or capitalized cash flow approach (CCF)?  If so, what discount rates or capitalization rates are the value conclusions based upon? Step 6 to reviewing a business valuation report involves assessing the reasonableness of the selected discount rates or capitalization rates (or “cap rates”). Although discount rates and cap rates are related terms, they are not interchangeable.  For clarification, each of these terms is discussed briefly below: Discount Rate A discount rate is the rate of return used to convert a monetary sum […]

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