Valuing Contingent Consideration: Discount Rate Selection

BVResearch Pro
American Society of Appraisers Business Valuation Review™
Fall 2011 Volume 30, Issue 3 pp. 100-103
Daniel Guderjohn, ASA

Summary

Earnouts have become an increasingly prominent component of transaction consideration. At the same time, fair value accounting requirements have heightened the need to value them, as well as other forms of contingent consideration. While several models have been developed to value contingent consideration, there has been less debate about how to set important model parameters, such as the discount rate. This article provides one simple method of selecting a discount rate for the valuation of earnouts and other contingent consideration.
Valuing Contingent Consideration: Discount Rate Selection
PDF, Size: 68 KB

Copyright American Society of Appraisers

The information contained in this product is based on content obtained by ASA from sources considered to be reliable, but is not guaranteed as to accuracy and does not purport to be complete. BVR and ASA accept no liability for the use of such information which is provided "AS IS" and with no warranties, express or implied.