Paglia and Slee also asked appraisers what equity risk premia, size premia, company specific risk factors, and risk-free rates they are now using. Again, after all the commentary on how to handle recent volatility (much of it reported by BVWire), here are the averages (note:--these are mean, not median, averages).
Market (Equity) Risk Premium |
7.4% |
Size premium for private company with $250M in revenues |
3.1% |
Size premium for private company with $25M in revenues |
5.0% |
Size premium for private company with $1M in revenues |
6.9% |
Average company specific risk premium for private company with $250M in revenues |
2.5% |
Average company specific risk premium for private company with $25M in revenues |
4.3% |
Average company specific risk premium for private company with $1M in revenues |
6.4% |
Industry risk premium for typical manufacturing company |
3.4% |
Industry risk premium for typical service company |
3.4% |
Risk-free rate |
4.9% |