Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/274722 
Authors: 
Year of Publication: 
2022
Citation: 
[Journal:] Journal of Risk and Financial Management [ISSN:] 1911-8074 [Volume:] 15 [Issue:] 5 [Article No.:] 200 [Year:] 2022 [Pages:] 1-17
Publisher: 
MDPI, Basel
Abstract: 
The simulation-based company valuation values a company on the basis of the risks actually present in the company without having to derive them from the capital market data. The simulation-based company valuation takes into account the market imperfections, such as the probability of insolvency or the lack of diversification, and fulfils the legal requirements and auditing standards for a company valuation. The simulation-based company valuation is an alternative to the CAPM-based company valuation, which, under the assumption of perfect capital markets, derives the risks through capital market comparisons. A simulation-based business valuation has many advantages and is particularly suitable for valuing medium-sized companies, start-ups, companies in a crisis, and for integrating country-specific risks into business valuations. Due to the internationally widespread use of the CAPM, a simulation-based company valuation is still rarely used in practice. This article shows which valuation formulas are necessary for the application of a simulation-based company valuation. These are used for both the certainty equivalent method and for the risk premium method. In a concrete and valuation example, the simulation-based business planning and company valuation is carried out, and the derived valuation formulas are applied in a way that allows a transfer to concrete valuation cases in practice. It is shown that the certainty equivalent method and the risk premium method lead to identical company values.
Subjects: 
certainty equivalent
company valuation
Gordon Growth Model
risk premium
simulation
Persistent Identifier of the first edition: 
Creative Commons License: 
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Document Type: 
Article

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