Valuation of Premiums

A model to value the premium you should pay for growth in either an intrinsic valuation or a relative valuation.

by Prof. Aswath Damodaran
Professor at NYU Stern School of BusinessFollow 951

with NYU Stern School of Business
An Education in PossibleFollow 46

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Description
This excel quantitative model enables you to value the premium one should pay for growth when making a valuation.

The inputs needed to get an idea of this premium are:
- market capitalization
For this year and last year:
- book value of equity
- total det outstanding
- cash & marketable securities
- revenues
- operating income (EBIT)

This year only:
- effective tax rate
- net income
- expected growth rate in operating income
- return on invested capital on growth
- length of growth period
- cost of equity
- cost of capital
- riskfree

Note: this model is being shared with the authorization of Professor Aswath Damodaran from NYU Stern Business School (www.damodaran.com)

This Best Practice includes
1 Excel Model File