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Discount Rate by the Build Up Method Discount Rate Re = Rf + ERP + SCP + SCRP The Discount Rate Rate Re is the required rate of return an investor would demand based on the risks associated with the income stream. This page explains how this rate is estimated. |
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The Discount Rate Rate Re is the required rate of return an investor would demand based on the risks associated with the income stream. This page explains how this rate is estimated. |
Ibbotson SCP Estimate* $1.4m < Biz size < $144M SCRP =4.54% Biz size < $1.4M SCRP = 9.9% *Rates from Stocks Bonds Bills and Inflation Yearbook, publisher Ibbotson Associates, Chicago, Illinois (2005). |
SCRP Alternative Estimation Low Risk SCRP= 0-5% Medium Risk SCRP= 6-10% High Risk SCRP > 11% |
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