MARKET OF FINANCIAL SERVICES

TERESHHENKO Oleh ¹

¹SHEE “Kyiv National Economic University named after Vadym Hetman”
OrcID ID : https://orcid.org/0000-0001-8808-1383

Pragmatics of the discount rate calculation during the financial crisis

The article highlights the pragmatic question of calculating the discount rate for assets which are in developing markets (emerging markets). This calculation is complicated especially during the financial crisis, which is accompanied by hyperinflation, falling or significant fluctuations of the national currency, trade wars, collapse of the banking system. The need for discounting future cash flows (or income) arises in the case of business valuation, analysis of investment projects, determining the fair value of certain assets, the calculation of value-oriented indicators. It was found that the discount rate is advisable to calculate by the algorithm of weighted average rate on capital expenditure. It is proved that in addition to the standard problems of calculating such rates, which are characteristic for developed markets (the problem of recycling, the expected rate of spending on borrowed capital), but for emerging markets it is inherent the problem of calculating the risk-free rate, the risk premium of the country, the order of integration of individual risk parameters in common model evaluation and so on. The article contains a number of guidelines that allow to solve the problems of calculation of certain parameters that affect the rate of cost of capital, such as the risk-free interest rate, average market risk premium and beta factor. Also hybrid model of integration of crisis premium for country to the risk assessment model of the costs rates for equity.

Keywords: discount rate, spending on equity rate, risk-free interest rate, country risk premium, beta factor, WACC, CAMP, crisis hybrid model.

JEL: G21, G24, E22.

Tereshhenko O. . Pragmatics of the discount rate calculation during the financial crisis / O. . Tereshhenko // Фінанси України. - 2015. - № 6. - C. 58-71.