Factors affecting the Equity Risk Premium

Factors affecting the Equity Risk Premium

Risk-averse investors demand a higher rate of return on an average equity risk investment compared to a risk-free investment. The difference in return is the Equity Risk Premium (ERP). ERP is the price of risk. What, however, are the factors that influence the ERP?...
Business valuation and risk

Business valuation and risk

risk /rɪsk/ — a situation involving exposure to danger, from Italian risco “danger” Business value is a function of the future expected cash flows from the business and the risk attached to those cash flows. The value of a business is the present value of future cash...
Marketability Discounts

Marketability Discounts

Marketability discounts are often applied by business valuation experts to reflect the difficulty in selling shares in a private business compared to selling shares in a publically listed company. You can sell shares in a listed stock at the click of a button, with a...