Intangible Asset Valuation

Discount & Capitalization Rates

valuation_discount_rate

Read-onlyIdempotent

Build discount and capitalization rates for income-based valuations using build-up, CAPM, WACC, tax-shield, control premium, Finnerty DLOM, or currency/country adjustments.

Instructions

Construct discount and capitalization rates: build-up, CAPM, WACC, tax-amortization benefit, control premium, Finnerty DLOM, and currency/country-risk adjustment. Method selects the formula. Use to derive the rate that feeds every income-based method; build_up and capm estimate cost of equity, wacc blends debt and equity. For a cross-border rate with currency and country premia use method currency_adjusted; for the cash flows the rate discounts use valuation_time_value. Per method: build_up needs risk_free_rate + equity_risk_premium (optional: size_premium, industry_risk_premium, specific_risk_premium); capm needs risk_free_rate + beta + market_return; wacc needs equity_value + debt_value + cost_of_equity + cost_of_debt + tax_rate; tax_amortization_benefit needs discount_rate + useful_life + tax_rate + asset_value; control_premium needs minority_price + control_price; dlom_finnerty needs restricted_period + volatility + risk_free_rate; currency_adjusted needs base_rate (optional: currency_risk_premium, country_risk_premium). All rates and premiums are decimals; wacc requires both equity_value and debt_value, and dlom_finnerty volatility is an annualized decimal. Only method is required; all other parameters are method-dependent — supply those the selected method names and omit the rest (defaults apply where defined). Rates and premiums are decimals (0.10 = 10%). Pure arithmetic: no I/O and no external calls, rounded to 2 decimals; parameters belonging to other methods are accepted and ignored. An unknown method, or a missing method-required parameter, returns an error instead of a value.

Input Schema

TableJSON Schema

Name	Required	Description
`beta`	No	Systematic risk beta (market = 1.0).
`method`	Yes	Formula to apply. Options: build_up = r = Rf + ERP + size + industry + specific premiums.; capm = r = Rf + beta * (Rm - Rf).; wacc = WACC = (E/V) Re + (D/V) Rd (1 - Tc).; tax_amortization_benefit = PV of the tax shield from amortizing the asset.; control_premium = (Control price - minority price) / minority price.; dlom_finnerty = Finnerty average-strike put option DLOM.; currency_adjusted = r = base rate + currency premium + country premium.
`tax_rate`	No	Marginal tax rate as a decimal (0.25 = 25%).
`base_rate`	No	Base discount rate before currency/country adjustment, as a decimal (e.g. 0.12 = 12%).
`debt_value`	No	Market value of debt D, in currency units.
`volatility`	No	Annualized volatility sigma as a decimal (0.30 = 30%).
`asset_value`	No	Asset value the tax amortization benefit is computed on, in currency units.
`useful_life`	No	Useful life in years n (integer ≥ 1).
`cost_of_debt`	No	Pre-tax cost of debt Rd as a decimal (e.g. 0.06 = 6%).
`equity_value`	No	Market value of equity E, in currency units.
`size_premium`	No	Small-size premium as a decimal (e.g. 0.03 = 3%).
`control_price`	No	Controlling-interest share price or value, in currency units.
`discount_rate`	No	Per-period discount rate as a decimal (0.10 = 10%).
`market_return`	No	Expected market return as a decimal (0.10 = 10%).
`cost_of_equity`	No	Cost of equity Re as a decimal (e.g. 0.12 = 12%).
`minority_price`	No	Minority (pre-control) share price or value, in currency units.
`risk_free_rate`	No	Risk-free rate as a decimal (0.04 = 4%).
`restricted_period`	No	Restricted / marketability period in years t (≥ 0).
`equity_risk_premium`	No	Equity risk premium as a decimal (0.06 = 6%).
`country_risk_premium`	No	Country risk premium as a decimal (e.g. 0.03 = 3%).
`currency_risk_premium`	No	Currency risk premium as a decimal (e.g. 0.02 = 2%).
`industry_risk_premium`	No	Industry risk premium as a decimal (e.g. 0.02 = 2%).
`specific_risk_premium`	No	Company-specific risk premium as a decimal (e.g. 0.03 = 3%).

Output Schema

TableJSON Schema

Name	Required	Description
`error`	No	Error message when the call fails.
`steps`	No	Intermediate calculation steps for traceability (one string per step).
`value`	Yes	Computed valuation, rate, or metric.
`method`	No	Formula / method name that produced the result.
`assumptions`	No	Modelling assumptions applied (list of strings or key/value object).
`defaults_applied`	No	Optional parameters that were not supplied, so their documented defaults were used.
`formula_reference`	No	Mathematical formula or reference applied.

Schema Changelog

Changes observed during successful MCP inspections.

Changed1 schema field changedv2.1.1Oct 2, 2026

addedOutput schema / properties / defaults_applied

Added value: +{
+  "description": "Optional parameters that were not supplied, so their documented defaults were used.",
+  "items": {
+    "type": "string"
+  },
+  "type": "array"
+}

Changed10 schema fields changedv2.0.1Oct 1, 2026

changedInput schema / properties / base_rate / description

Previous value: -"Base discount rate before currency/country adjustment, as a decimal."New value: +"Base discount rate before currency/country adjustment, as a decimal (e.g. 0.12 = 12%)."

changedInput schema / properties / cost_of_debt / description

Previous value: -"Pre-tax cost of debt Rd as a decimal."New value: +"Pre-tax cost of debt Rd as a decimal (e.g. 0.06 = 6%)."

changedInput schema / properties / cost_of_equity / description

Previous value: -"Cost of equity Re as a decimal."New value: +"Cost of equity Re as a decimal (e.g. 0.12 = 12%)."

changedInput schema / properties / country_risk_premium / description

Previous value: -"Country risk premium as a decimal."New value: +"Country risk premium as a decimal (e.g. 0.03 = 3%)."

changedInput schema / properties / currency_risk_premium / description

Previous value: -"Currency risk premium as a decimal."New value: +"Currency risk premium as a decimal (e.g. 0.02 = 2%)."

changedInput schema / properties / industry_risk_premium / description

Previous value: -"Industry risk premium as a decimal."New value: +"Industry risk premium as a decimal (e.g. 0.02 = 2%)."

changedInput schema / properties / restricted_period / description

Previous value: -"Restricted / marketability period in years t."New value: +"Restricted / marketability period in years t (≥ 0)."

changedInput schema / properties / size_premium / description

Previous value: -"Small-size premium as a decimal."New value: +"Small-size premium as a decimal (e.g. 0.03 = 3%)."

changedInput schema / properties / specific_risk_premium / description

Previous value: -"Company-specific risk premium as a decimal."New value: +"Company-specific risk premium as a decimal (e.g. 0.03 = 3%)."

changedInput schema / properties / useful_life / description

Previous value: -"Useful life in years n."New value: +"Useful life in years n (integer ≥ 1)."

Changed2 schema fields changedv0.1.4Sep 30, 2026

changedOutput schema / properties / steps / description

Previous value: -"Intermediate calculation steps for traceability."New value: +"Intermediate calculation steps for traceability (one string per step)."

removedOutput schema / properties / steps / items / type
```
Removed value: -"object"
```

First observedv0.1.0Sep 30, 2026

TDQS

A4.7/5.0

Behavior4/5

Does the description disclose side effects, auth requirements, rate limits, or destructive behavior?

Adds error semantics not covered by annotations: an unknown method or a missing method-required parameter returns an error instead of a value, extra parameters for other methods are accepted and ignored, and results are rounded to 2 decimals. 'No I/O and no external calls' partially overlaps openWorldHint=false/readOnlyHint=true, but the failure-mode and parameter-tolerance disclosure is genuinely additive.

Agents need to know what a tool does to the world before calling it. Descriptions should go beyond structured annotations to explain consequences.

Conciseness4/5

Is the description appropriately sized, front-loaded, and free of redundancy?

Front-loaded with purpose, then usage routing, then per-method parameter requirements — a sensible order with no filler. It does repeat the decimal convention ('All rates and premiums are decimals' appears twice), which is minor but redundant.

Shorter descriptions cost fewer tokens and are easier for agents to parse. Every sentence should earn its place.

Completeness5/5

Given the tool's complexity, does the description cover enough for an agent to succeed on first attempt?

For a 23-parameter, single-required-parameter tool with an output schema, the description covers everything an agent needs: method selection, per-method inputs, defaults/omission behavior, and error conditions. Return-value format is appropriately left to the output schema.

Complex tools with many parameters or behaviors need more documentation. Simple tools need less. This dimension scales expectations accordingly.

Parameters5/5

Does the description clarify parameter syntax, constraints, interactions, or defaults beyond what the schema provides?

Schema description coverage is 100%, so the baseline would be 3, but the description supplies cross-parameter conditional semantics the schema cannot express: the exact required/optional parameter set per method (e.g., build_up needs risk_free_rate + equity_risk_premium with size/industry/specific optional; wacc needs both equity_value and debt_value), plus the note that only method is required and other parameters should be omitted.

Input schemas describe structure but not intent. Descriptions should explain non-obvious parameter relationships and valid value ranges.

Purpose5/5

Does the description clearly state what the tool does and how it differs from similar tools?

States a specific verb and resource ('Construct discount and capitalization rates') and enumerates the exact methods covered (build-up, CAPM, WACC, tax-amortization benefit, control premium, Finnerty DLOM, currency-adjusted). It also distinguishes itself from the sibling valuation_time_value by naming what that tool handles instead.

Agents choose between tools based on descriptions. A clear purpose with a specific verb and resource helps agents select the right tool.

Usage Guidelines5/5

Does the description explain when to use this tool, when not to, or what alternatives exist?

Explicit routing guidance: 'Use to derive the rate that feeds every income-based method,' build_up/capm estimate cost of equity, wacc blends debt and equity, and currency_adjusted is prescribed for cross-border rates, with valuation_time_value named for the cash flows being discounted. When-to-use and the alternative are both stated.

Agents often have multiple tools that could apply. Explicit usage guidance like "use X instead of Y when Z" prevents misuse.

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