Hi Prof. Wandmacher,

I see where you are coming from on the first point. To clarify, I multiply TV by the discount rate instead of terminal growth rate because I assume it grows at 20% for one more year. I know the standard formula multiplies by the terminal rate as you pointed out, but that is just a matter of what one thinks it will grow at for one more year. Either way, it doesn't make too big a difference; the more influential part of the calculation would be dividing by r-g.

To your second point, you must get the net present value of the TV because TV is the value out in the future, but we want today's value.

Finally, you must have noticed I multiply the TV by (1 + discount rate) which is non-standard. That is because Excel’s NPV formula will think of the TV as one year out in the future, 2028 in our example, because the cell is one space to the right of the last cash flow. But our TV calc (1+g/r-g) provides the value for 2027. So I am merely adjusting for this, or else it will be discounted one more year than it should.

Re: cost of equity being low - certainly, I use a much higher rate of 50% for my Maker DAO valuation. Here, the cash flows are more concrete than MKR so I used a lower rate.

I like to think of cost of equity as simply the alternative return I could probably get on my money, something like 10% in tradfi. I know this isn't what's taught in academics, where you have a whole cost of equity formula based on beta. I personally don’t like that approach; I prefer thinking of cost of equity as what you believe you can consistently get from an index (crypto index in this case). This way of approaching cost of equity is what I learned from my L/S team at Point72 back in the day, and I think it makes sense.

Hope this helps clarify.