In Valutico’s peer analysis, the spread over the risk-free rate is a key component for estimating the cost of debt and benchmarking a company’s financial risk. This document outlines how the spread is calculated and how the valuation date affects it.
Peer Interest Rate Calculation at the Valuation Date
Valutico calculates the effective interest rate for each peer company using the most recent financial data available at the valuation date. Specifically, we use:
Interest Expense (from the latest reported period)
Book Value of Debt (from the same period)
The effective interest rate is derived as:
This calculation reflects the actual borrowing cost observed for each peer at the time of valuation.
Risk-Free Rate Reference
To isolate the credit spread, Valutico compares the calculated effective interest rate to the risk-free rate of the peer’s country, typically represented by:
The yield on 10-year government bonds, as of the valuation date.
This ensures that the spread reflects market conditions at the time of the valuation, rather than relying on historical averages that may not capture current interest rate environments or sovereign credit risk.
Valuation Date Behaviour
The valuation date is selected by the user when creating a new Private Company Valuation. If not manually set, Valutico defaults to the most recent date on which the valuation was created or last modified. All market data, such as the risk-free rate as aligned to this date to ensure consistency.
Where to View the Calculation
To view the effective interest rate and spread calculation for individual peers:
Navigate to the Peers module
Click on the three-dot menu next to a peer’s name
Select "Financials"
