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Why is the default for the WACC premium Zero?
Why is the default for the WACC premium Zero?

WACC Premium usages and defaults

Daniel avatar
Written by Daniel
Updated over a week ago

The WACC Premium is a quantity that is added to the WACC in order to get the overall discount higher. In our methodology instead of adding arbitrary WACC premiums, we use other scientifically based discounts like the illiquidity discount and the survival rates.

It is the practice of some valuators to not apply illiquidity discount and survival and instead add percentage points to the WACC and that is why we make it available in the tab Advanced Settings.

In order to raise the default ‘Discount Rate’ found in the DCF and VC methods, you can to increase the WACC Premium.

[Advanced] If you'd like to set your own WACC, you can use the WACC Premium as a quick solution. Just set the WACC Premium to the difference between your desired WACC and the currently calculated one that you can see in the report.

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