Individual Tax Rates and Risk-adjusted Discounting
||Nelson, Theron; Smith Steven
||Individual Tax Rates and Risk-adjusted Discounting
||10th European Real Estate Society Conference (10-13 June 2003) Helsinki, Finland
||The typical procedure for estimating investment value (value to a given investor) of any incomegenerating risky asset (e.g., income-producing real estate) involves basically three steps: First, the investor estimates the stream of cash flows expected to be generated by the asset in the future. Second, the required return to the asset based is derived based on the investorís assessment of the relative non-diversifiable (or systematic) risk associated with the stream of cash flows. This relative risk is due to the co-variability over time between returns realized to the asset and aggregate returns to all risky assets in the entire economy (or market). Finally, the investor computes the present value of the steam of expected cash flows, using the required rate of return as the risk-adjusted discount rate. This present value is the estimate of investment value.
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||Session 8, Valuation Methodology 2
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