It was shown earlier that unconditional expected cash flows can be discounted at a constant risk-adjusted discount rate if these cash flows follow a multiplicative binomial process with a constant growth rate (“simplified discounting rule”). This paper extends this analysis to the case of...

In capital budgeting it is common practice to discount expected cash flows with a constant risk adjusted discount rate. This discount rate often is derived on the basis of the capital asset pricing model. Within this paper sufficient conditions for supporting this discounting rule will be...

This paper reviews different schools of thought on the question of if and how personal taxes should be incorporated into the valuation of companies or projects. The paper shows under which conditions the risk-neutral valuation approach yields the same result as the Tax-CAPM. Special cases are...

We test an approach for estimating the potential price of as yet untraded equity investments. The innovative aspect of our approach is that we use specific control factors, which we identify on the basis of a simplified valuation model. We investigate the accuracy of our approach by using a...