Intangible Asset Valuation

Discount & Capitalization Rates

valuation_discount_rate

Read-onlyIdempotent

Construct discount and capitalization rates via build-up, CAPM, WACC, tax-amortization, control premium, DLOM, and currency adjustment for income-based intangible asset valuation.

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; other parameters are method-dependent, so supply those named for the selected method and omit the rest (documented defaults apply where defined). Pure arithmetic: no I/O and no external calls, and numeric results are returned rounded to 2 decimals. Parameters belonging to other methods of this tool are accepted and ignored. Supplying an unknown method, or leaving unset a parameter that the chosen method requires, 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.
`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.
`cost_of_debt`	No	Pre-tax cost of debt Rd as a decimal.
`equity_value`	No	Market value of equity E, in currency units.
`size_premium`	No	Small-size premium as a decimal.
`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.
`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.
`equity_risk_premium`	No	Equity risk premium as a decimal (0.06 = 6%).
`country_risk_premium`	No	Country risk premium as a decimal.
`currency_risk_premium`	No	Currency risk premium as a decimal.
`industry_risk_premium`	No	Industry risk premium as a decimal.
`specific_risk_premium`	No	Company-specific risk premium as a decimal.

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).
`formula_reference`	No	Mathematical formula or reference applied.

Schema Changelog

Changes observed during successful MCP inspections.

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

A4.8/5.0

Behavior5/5

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

Annotations already declare readOnly, idempotent, non-destructive, closed-world, but the description adds substantial non-structured behavior: pure arithmetic with no I/O or external calls, results rounded to 2 decimals, parameters from other methods accepted and ignored, and error semantics for unknown methods or missing required params. None of this is in the annotations or schema.

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 per-method routing, then parameter mapping, then behavioral notes. The middle per-method parameter block is dense but every clause is load-bearing given seven methods. Slightly long, but not padded.

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?

With an output schema present, return-value explanation is unnecessary, and the description covers selection, per-method inputs, error behavior, and unit conventions. For a 23-parameter, 7-method tool this is complete enough for correct invocation.

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

Parameters4/5

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

Schema coverage is 100%, so the baseline is 3, but the description adds real value beyond the schema by mapping each method to its required and optional parameters (e.g. wacc needs equity_value + debt_value + cost_of_equity + cost_of_debt + tax_rate) and flagging unit conventions like annualized volatility. This conditional dependency structure is not expressed in the flat schema.

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 ('construct') and resource ('discount and capitalization rates') and enumerates the concrete formulas covered (build-up, CAPM, WACC, tax-amortization benefit, control premium, Finnerty DLOM, currency adjustment). It also explicitly separates itself from sibling valuation_time_value, so an agent can identify it without opening a schema.

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?

Gives explicit when-to-use guidance per method ('build_up and capm estimate cost of equity, wacc blends debt and equity'), names the condition that selects currency_adjusted, and routes the agent to valuation_time_value for the cash flows being discounted. This is genuine routing, not implied usage.

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

Deploy Server