Correctly Discounting the Terminal Value
June 4, 2025
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When valuing companies using discounted cash flows (DCF), accuracy is crucial—especially when discounting the Terminal Value (TV).
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Small and medium-sized enterprises (SMEs) are the backbone of the German economy – yet when it comes to their valuation, practice often misses the mark. In a new podcast episode, the directors of EIQF tackle a seemingly dry but highly relevant topic: business valuation according to the IDW S 1 standard – and why it is problematic for SMEs.
The Problem: Business Valuation According to IDW S 1 and CAPM
At the center of the criticism is the Capital Asset Pricing Model (CAPM), which continues to form the basis of many valuations. But this is precisely where the problem lies: the theoretical assumptions of CAPM simply do not fit the reality of mid-sized companies. Corporate risks are distorted, and specific characteristics are disregarded. The podcast guests therefore present a highly interesting alternative: simulation-based valuation.
Instead of relying on general market assumptions, this approach analyzes the actual, company-specific risks – granular, transparent, and compliant. Particularly noteworthy: the method is compliant with current regulations such as StaRUG and IDW PS 340 – an important signal for auditors, consultants, and CFOs.
👉 What does this mean for SMEs?
👉 How does simulation-based valuation work in practice?
👉 And why could it become the standard in the future?
The answers are provided in this insightful podcast episode – a must for anyone involved in business valuation, mid-market financing, or restructuring.
🎧 Listen now – and rethink valuation.
Why Many SMEs in Germany Are Incorrectly Valued – and What Really Helps
- Listen Now as a Podcast
- This audio file was created with the assistance of artificial intelligence.
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Podcast Recommendation: Why Many SMEs in Germany Are Incorrectly Valued – and What Really Helps
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Small and medium-sized enterprises (SMEs) are the backbone of the German economy – yet when it comes to their valuation, practice often misses the mark…
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