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What are the Calculations on the Qualitative Assessment for discounts, premiums, and risks?
What are the Calculations on the Qualitative Assessment for discounts, premiums, and risks?

Premium Cost of Equity, Trading Multiples. Discount to Trading Multiples and Risk Factor, CoE, Cost of the equity premium, discount, risk

Updated over a week ago

How can the calculations in the qualitative evaluation, specifically in the "Premium on Cost of Equity" (0.05 + 0.025 x (score -3) and for the trading multiples formula (-(0.3 + 015 x (score - 3) be explained in more detail?

The calculations mentioned are simple linear equations that transform the risk score (3 on average) into a Cost of Equity premium and discount to trading multiples of listed peers.

To explain using an example for the cost of equity calculation: We start with a 5% premium and add/subtract from that if there is a deviation from the average score of 3. The parameters themselves are best practice assumptions after speaking with many market participants (particularly in SME valuations), but yours might deviate from that.

Our planned Product developments will allow the users to edit more aspects of the Qualitative Assessment and the CoE and Discount. (i.e. the 5% or the 30% intercepts, as well as the 2.5% and the 15% slopes) editable by the users. We also plan to allow changing the weights for each factor and adding or removing elements.


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