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It should be related to your specific valuation model. The most common earnings related models use a risk free rate minus 3%.


As a standard reference (in the back of my head) I use for Swedish and U.S. equities, 7% real return assuming no growth rate in FCFE. So if we assume the entity will produce $100m per year in fcfe going forward with no growth rate, then the market value of equity is 100/0.07 = 1729. The 7% comes from 2% risk free rate + 5% risk premium (adjusted for ...

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