Discount Rate Myth 5: As rates approach zero, value goes to infinity!

In this session, the last of five on discount rate myths, I look at how low interest rates have skewed both actual valuations and how we think about DCF. Specifically, holding all else constant and lowering the risk free rate will cause valuations to implode but you cannot hold all else constant. As risk free rates change, so do nominal growth rates, risk premiums and even debt ratios, making the effect on value much more unpredictable. Slides: ~adamodar/pdfiles/blog/DiscountRateMyt