Toptal

The discount rate is a critical input in any discounted cash flow valuation analysis. How does an analyst estimate a reasonable discount rate for a private company that has no publicly traded debt or equity? This article focuses on best practices for estimation of the WACC in the context of a private company valuation. The discussion begins with an overview of the WACC, background on the components of the WACC, methods to estimate the WACC components for private companies, and an example of how to apply this framework to estimate a privately-held building materials company.

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