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Investment country risk premium influence on an enterprise estimated value
Visoka poslovna škola strukovnih studija, Novi Sad

emailsanjavbegovic@gmail.com
Keywords: investment country risk premium; yield rate of the own capital; enterprise value; discounting; cash flows
Abstract
Many business decisions are brought according to enterprise estimated value. Determinants that govern the value of an enterprise, being estimated according to discounted cash flows, are objective assumptions on cash flow movements in the future period, a constant rate of the enterprise growth in residual period of time and a discount rate. While calculating the discount rate, it is necessary to take into consideration the investment country risk premium which depends on the mark of investment country political stability, its legal system, tax rates, stability of the currency and other parameters. In that way, the investment country risk premium influences the result of estimation and consequently, the business decision of an investor. Different ways of investment country risk premium determination shall be introduced in this work, as well as their advantages, limitations and the way in which the risk premium fluctuation influences the estimated value of an enterprise. In determination of the investment country risk premium influence on the value of an estimated enterprise by cash flow discounting, we will give an overview of legislation and methodology for performing estimation of the values of enterprises in the Republic of Serbia.
References
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article language: English
document type: Review Paper
published in SCIndeks: 12/02/2014

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