Valuation of Premiums
Originally published: 20/06/2016 08:44
Publication number: ELQ-79232-1
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Valuation of Premiums

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

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 (

This Best Practice includes
1 Excel Model File

Prof. Aswath Damodaran offers you this Best Practice for free!

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Further information

The objective of this model is to get the following output values for a firm:
- Estimating Market Value of Straight Debt
- Estimated Value of Straight Debt in Convertible
- Value of Debt in Operating leases
- Estimated Value of Equity in Convertible
- Levered Beta for equity

For Equity, Debt, Preferred Stock and Capital
- Market Value
- Weight in Cost of Capital
- Cost of Component

4.8 / 5 (6 votes)

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