Harvard Business Review

JUNE 18, 2015

In operational engineering, PE firms develop industry and operating expertise that they bring to bear to add value to their portfolio companies. Such investments carry significant equity risk, suggesting that equity-based benchmarks like public market equivalents (PMEs) are appropriate.

CAPM 8

CAPM Discounted Cash Flow Company Rate of Return 8

Harvard Business Review

MARCH 10, 2011

Estimating the rate at which to discount the cash flows — the cost of equity capital — is an integral part of the exercise, and the choice of rate has a significant effect on estimates of a project's or a company's value. Yeh, William S. Schulze, and Michael H. McNulty et al.

CAPM 13

CAPM Cost Discounted Cash Flow Cost of Capital 13

Harvard Business Review

MARCH 10, 2011

Fully 79 percent of companies, including 91 percent with annual revenues greater than $1 billion, use discounted cash flow techniques. There is less consistency, however, in how organizations estimate cash flows and determine the weighted average cost of capital at which those cash flows are discounted.

Cost of Capital 12

Cost of Capital CAPM Cost Discounted Cash Flow 12