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Damodaran Valuation Model
This chapter lays the foundation for analysing risk in valuation, presenting alternative models for measuring risk and converting these risk measures into acceptable hurdle rates. The chapter explains the process of estimating discount rates by breaking down financing into debt and equity components, and discusses how best to estimate the different costs. Looking at different risk and return models in finance attempt to measure no diversifiable risk. It explains default risk and its measurement by ratings agencies. In addition, the chapter highlights the determinants of the default spread and why the default spread might change over time. The chapter can be viewed as an attempt to come up with a model that best measures the danger in any investment and then attempts to convert this into the opportunity that we would need to compensate for the danger.
55 Dsl
The second edition of Damodaran on Valuation stands out as the most reliable book for answering many of today?s critical valuation questions. Completely revised and updated, this edition is the ideal book on valuation for CEOs and corporate strategists.