The capital asset pricing model is a theoretical model that compares risk and return. CAPM (pronounced as cap "m") is used to calculate an appropriate discount or capitalization rate, which is then used in the capitalized cash flow or discounted cash flow valuation methods.
An earnout is a financing arrangement for the purchase of a business in which the seller finances a portion of the purchase price, and payment of this amount is contingent on achieving a predetermined level of future earnings. An earnout is often used to bridge a valuation gap. The seller only gets paid if the predetermined level of future EBITDA or other financial targets are achieved.
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