Additional Risk Premium refers to the extra premium that an investor would require to compensate for risks inherent in a target firm that is not captured by the market and industry risks. Typically, market and industry risks are captured in the Weighted Average Cost of Capital (WACC) when using the discounted cash flow method of valuation. Beyond the risk parameters captured in the WACC, investors sometimes seek additional compensation for perception of other potential risk factors associated with the business even though such risks may not materialise. The additional risk premium of investors results in increased expectation returns to compensate for such perceived additional risks.