The best way of getting at this is to look at the beta of similar public stocks.
Have to use history to estimate.
Reality discount tire store gresham or is this is highly boscovs coupon code off volatile and situation specific sometimes one can raise cheap money and sometimes one can not.
So for a private SaaS company one could assume.The public markets have returned around 8 per year over the last decade, and one would think that thats a reasonable rate expected by investors.The basic capm formula for.The Discount Rate should be the companys wacc.Ke.3 (17.7 2).4 20 would be a good estimate to use.
Ve value of equity.
While a lot of situational judgment should be applied, Cambridge Associates, which tracks the stronger venture firms, claims a 30 year venture return.7, and thats probably the best proxy.Yes, there probably.For public SaaS companies, the beta today seems to be about.3.In that blog post, we discuss why it is valuable to apply discounts to future cash flows when calculating the lifetime value of a customer (LTV).Plugging all this in for a SaaS company, one would get.If they conclude they wont get this return theyll sell the stock and the price will go down, if they conclude theyll get more than this return additional investors will buy the stock and the price will go up, eventually driving the return.This is the average interest rate on the companys debt.For most companies its just a weighted average of debt and equity, but some could have weird preferred structures etc so it could be more than just two components.