Some valuation practitioners use a normalized risk-free rate in determining the cost of capital. This can inflate the cost of equity by up to a couple of percentage points, which in turn depresses valuation multiples. Is normalizing the risk-free rate a rational, reasonable practice? In today’s guest post, Chris Mercer suggests the answer is an emphatic no.
To read the full article in Mercer Capital’s Financial Reporting Blog, click: Should Business Appraisers “Normalize” Long-Term Treasury Rates When Building Equity Discount Rates?
This article is republished from Mercer Capital’s Financial Reporting Blog. It is reprinted with permission. To subscribe to the blog, visit: http://mercercapital.com/category/financialreportingblog/.
