ratios libres

7/24/2019 Ratios Libres

1/12

SESSION 3: DISCOUNT RATEBASICSTHE RISK FREE RATE

Aswath Damodaran

Aswath Dam


2/12

Estimating Inpts: Dis!ont R

Criti!a# ingr"di"nt in dis!ont"d !ash$ow %a#ation& Erro

"stimating th" dis!ont rat" or mismat!hing !ash$ows adis!ont rat"s !an #"ad to s"rios "rrors in %a#ation&

At an intiti%" #"%"#' th" dis!ont rat" s"d sho#d (" !owith (oth th" ris)in"ss and th" t*p" o+ !ash$ow ("ing d E,it* %"rss Firm: I+ th" !ash $ows ("ing dis!ont"d ar" !ash

",it*' th" appropriat" dis!ont rat" is a !ost o+ ",it*& I+ th" !!ash $ows to th" -rm' th" appropriat" dis!ont rat" is th" !ost

Crr"n!*: Th" !rr"n!* in whi!h th" !ash $ows ar" "stimat"d sth" !rr"n!* in whi!h th" dis!ont rat" is "stimat"d&

Nomina# %"rss R"a#: I+ th" !ash $ows ("ing dis!ont"d ar" no$ows .i&"&' r"$"!t "/p"!t"d in$ation0' th" dis!ont rat" sho#d

Aswath Damodaran

2


3/12

Cost o+ E,it*

Th" !ost o+ ",it* sho#d (" high"r +or ris)i"r in%"stm

#ow"r +or sa+"r in%"stm"nts 1hi#" ris) is sa##* d"-n"d in t"rms o+ th" %arian!" o

r"trns arond an "/p"!t"d r"trn' ris) and r"trn mo-nan!" assm" that th" ris) that sho#d (" r"ward"d (i#t into th" dis!ont rat"0 in %a#ation sho#d (" th"

p"r!"i%"d (* th" margina# in%"stor in th" in%"stm"nt 2ost ris) and r"trn mod"#s in -nan!" a#so assm" tha

margina# in%"stor is w"## di%"rsi-"d' and that th" on#* or sh" p"r!"i%"s in an in%"stm"nt is ris) that !annot (di%"rsi-"d awa* .I&"' mar)"t or nondi%"rsi-a(#" ris)0

Aswath Damodaran

3


4/12

Th" Cost o+ E,it*: Comp"tin2od"#sModel Expected Return Inputs Needed

CA42 E.R0 5 R+ 6 .Rm R+0 Ris)+r"" Rat"B"ta r"#ati%" to mar)"t port+o#io

2ar)"t Ris) 4r"mim

A42 E.R0 5 R+ 6 7 .R7 R+0 Ris)+r"" Rat"8 9 o+ Fa!tors8

B"tas r"#ati%" to "a!h +a!tor

Fa!tor ris) pr"mims

2#ti E.R0 5 R+ 6 7 .R7 R+0 Ris)+r"" Rat"8 2a!ro +a!tors

+a!tor B"tas r"#ati%" to ma!ro +a!tors

2a!ro "!onomi! ris) pr"mims

4ro/* E.R0 5 a 6 (7 7 4ro/i"s

R"gr"ssion !o";!i"nts

Aswath Damodaran

4


5/12

Th" CA42: Cost o+ E,it*

1hi#" th" CA42 .and th" CA42 ("ta0 has !om" in +or w"##

!riti!ism o%"r th" #ast +or d"!ad"s .+or ma)ing nr"a#isti!assmptions' +or ha%ing param"t"rs that ar" togh to "st+or not wor)ing w"##0' it r"mains th" mostwid"#* s"d mopra!ti!"&

In th" CA42' th" !ost o+ ",it* is a +n!tion o+ thr"" inpt

Cost o+ E,it* 5 Ris)+r"" Rat" 6 E,it* B"ta < .E,it* Ris

In pra!ti!"' =o%"rnm"nt s"!rit* rat"s ar" s"d as ris) +r"" rat"s

Histori!a# ris) pr"mims ar" s"d +or th" ris) pr"mim

B"tas ar" "stimat"d (* r"gr"ssing sto!) r"trns against mar)"t r"

Aswath Damodaran

5


6/12

A Ris)+r"" Rat"

On a ris)+r"" ass"t' th" a!ta# r"trn is ",a# to th" "/p"!t"

Th"r"+or"' th"r" is no %arian!" arond th" "/p"!t"d r"trn& For an in%"stm"nt to (" ris)+r""' th"n' it has to ha%"

No d"+a#t ris)

No r"in%"stm"nt ris)

>& Tim" hori?on matt"rs: Ths' th" ris)+r"" rat"s in %a#ation pon wh"n th" !ash $ow is "/p"!t"d to o!!r and wi## %ar*

tim"& I+ *or !ash $ows str"t!h ot o%"r th" #ong t"rm' *orat" has to (" a #ong t"rm ris) +r"" rat"&

@& Not a## go%"rnm"nt s"!riti"s ar" ris)+r"": Som" go%"rnm"d"+a#t ris) and th" rat"s on (onds iss"d (* th"m wi## not

Aswath Damodaran

6


7/12

"ts start "as*A ris)+r"" rat" in US do##ars

I+ *o ar" %a#ing a !ompan* in US do##ars' *o n""d a US do##ar r

In pra!ti!"' w" ha%" t"nd"d to s" US tr"asr* rat"s as ris) +r"" that is (i#t on th" pr"smption that th" US tr"asr* is d"+a#t +r" I+ *o a!!"pt th" pr"mis" that th" US tr"asr* is d"+a#t +r""' *o sti## ha%

!hoi!"s' sin!" th" US tr"asr* iss"s s"!riti"s with di"ring matriti"s .rmonths to 3 *"ars0 as w"## in r"a# or nomina# t"rms .In$ation prot"!t"d tor nomina# tr"asri"s0

In %a#ation' w" "stimat" !ash $ows +or"%"r .or at #"ast +or %"r* #ong tim"

nomina# t"rms& Th" !orr"!t ris) +r"" rat" to s" sho#d th"r"+or" (" a #ongrat"& Th" thirt**"ar tr"asr* (ond rat" is th" #ong"st t"rm rat" that *o !th"r" is a good !as" to (" mad" that it sho#d (" th" ris) +r"" rat"& How"%di;!#t it is to g"t th" oth"r inpts +or th" dis!ont rat" .d"+a#t spr"ads pr"mim0 o%"r thirt* *"ar p"riods' *o sho#d !onsid"r sing th" t"n*"ar(ond rat" as *or ris) +r"" rat" +or US do##ar %a#ations&

Aswath Damodaran

7


8/12

A Ris)+r"" Rat" in Eros

Aswath Damodaran

8


9/12

A Ris)+r"" Rat" in nomina# R"

Th" Bra?i#ian go%"rnm"nt had >*"ar BRG d"nom

(onds otstanding in anar* @>3' with an int"r"J&

In anar* @>3' th" Bra?i#ian go%"rnm"nt had a #!rr"n!* so%"r"ign rating o+ Baa@& Th" t*pi!a# d"+spr"ad .o%"r a d"+a#t +r"" rat"0 +or Baa@ rat"d !o

(onds in anar* @>3 was >&LJ& Th" ris) +r"" ranomina# r"ais is th"r"+or":

Ris)+r"" rat" in R"ais 5 Nomina# >*"ar BRG rat" M D"+

5 J >&LJ 5 &@LJ

Aswath Damodaran

9


10/12

So%"r"ign D"+a#t Spr"ads: Two paths to th" samd"stination

Aswath Damodaran

10


11/12

And a third M A%"rag" D"+a#t Spr"ads: ana

Rating Default spread in basis points

Aaa

Aa> @LAa@ L

Aa3

A> L

A@ >

A3 >>L

Baa> >L

Baa@ >L

Baa3 @

Ba> @P

Ba@ @L

Ba3 3@LB> P

B@ L

B3 Q

Caa>

Caa@ L

Caa3 >

Aswath Damodaran

11


12/12

Ris) +r"" rat"s in di"r"nt !rr"n!i"s: ana

Aswath Damodaran

12

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