I wanted to value a High-tech start-up of which I have the cash flows of the coming 6 years. I decided to use the Discounted Cash Flow Method. To do so, I calculated the Discount rate. For a High-tech start-up the discount rate = Rate of equity (which can be determined by the Capital Asset Pricing Model). So I calculated my Discount rate, used it in the DCF model And found an approximation of the Value of the High-tech Firm.

But I didn't took in consideration that the company sells their products globally. This fact has an impact on its beta Factor! and consequently on the discount rate and finally on the Value of the firm!

One option is to use the International CAPM model, but 'my' company is going to sell globally, so how do I know the impact of that to the Discount rate?

  • 1
    $\begingroup$ You should use WACC for discount rate, but how are you going to figure out what the global risk free rate is? Treasury bill rate? $\endgroup$
    – london
    Sep 15, 2017 at 22:15
  • $\begingroup$ If you "know" the cash flows for the next six years, then there is no risk. This asset is a bond. Whether it is sold globally or nationally is irrelevant. You know the cash flows. You do not need a global discount rate. You need a discount rate that reflects your marginal cost of funds. $\endgroup$ Dec 14, 2017 at 16:41

1 Answer 1


When using DCF you would discount using the weighted average cost of capital; and yes you can then find the expected return on equity using CAPM - if you have beta. But how do you know what beta is in your case?

That being said it seems like you are just using DCF for the 6 years where you know the cash flow? Will the company seize to exist after that? If not, you need to discount all future cash flows as well making assumptions on how income/profit will continue in the future (usually a constant growth rate from e.g. Year 10-15 and into all eternity).


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