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Some common mistakes - Deloitte
Some common mistakes to avoid in estimating and applying discount ratesDeloitte | A Middle East Point of View | Spring 2014| 37 Discount ratesOne of the most critical issues for an investor toconsider in a strategic acquisition is to estimate howmuch the company being acquired is worth. On theback of the 2008 financial crisis, a valuation is beinglooked at not just as a static value at a point in time,but more as a basis for developing a post-acquisitionoperation plan to drive value accretion andminimizing risk. As such, the Discounted CashFlow (DCF) analysis is being more frequently usedto value companies.
(WACC) represents the average cost of financing a company debt and equity, weighted to its respective use. Essentially, the Keconsists of a risk free rate of return and a premium assumed for owning a business and can be determined based on a Build-up approach or Capital Assets Pricing Model (CAPM). While both these
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