Question

Dear Aswath,

I'm currently valuing a patent in robotics related industry. Can you suggest which beta should I take from your list that will be more appropriete to this industry (in order to use in CAPM model)?

Best regards,

Alexander

Answer 1

I will try to answer your question although your question is directed to Prof. Damodaran. In valuing a specific patent, you should look into the discount rate for the industry your are valuing for. Also, you should be aware of the capital structure of the industry as the structure has a fair amount of impact on the discount rate. If you don't have these details then perhaps you have to come up with a discount rate based on some basic assumptions about the risk levels of the industry, the success rate of the products, and average expected returns. Hope that helps!