Market imperfections call into question the suitability of the CAPM for deriving the cost of capital. The valuation by incomplete replication introduces a valuation concept that takes capital market imperfections into account and derives the risk-adjusted cost of capital (or risk discounts) on...

The existing probability of a company to be insolvent (bankrupt), is known as insolvency risk or distress risk. This should be considered during every corporate valuation, even though it does not appear in every valuation report.Only under the rather unrealistic assumption of an unflawed capital...

Today, the determination of a company's value is mostly based on the discounted cash flow method (DCF method). In doing so, planned values of the cash flows (or income/flow-to-equity) provided by the company are usually discounted to the present with a calculated a discount rate based on the...