Last week, valuation experts got the first walk-through of BVR’s Cost of Capital Professional, the newest resource for developing a cost of equity capital estimate. A main takeaway from the demo is that users are not steered toward outputs from a “black box” of complex mathematics. The platform is flexible in that it allows the expert to use his or her professional judgment and common sense in developing one or more COE estimates using the build-up method and CAPM for any valuation date.

Freedom of choice: The platform integrates data from multiple sources, including the University of Chicago’s Center for Research in Security Prices (CRSP) data, Professor Aswath Damodaran’s data resources, and the U.S. Federal Reserve on Treasury bond yields. You have the freedom to choose the period of historical return data for your analysis. For example, during the demo, a start date of 1982 for estimating the size premium was used that showed virtually no size premium in CRSP Decile 10 (companies with the smallest market capitalization). If you go all the way back to the 1920s, the size effect will be very different. The point is that the analyst controls the period of historical return data that he or she feels is most appropriate for the specific subject company. The platform currently has CRSP market return data up to Sept. 30, 2018. Year-end 2018 data will be added by the end of January.

The demo was conducted during a free webinar presented by the author of the platform, Dr. Michael Crain (Florida Atlantic University), and advisory board co-chair Ronald Seigneur (Seigneur Gustafson LLP). Adam Manson (BVR), the other advisory board co-chair, was on hand to field the many questions from the huge audience. In response to a question on methodology, the presenters said that the platform is based on the fundamental approach from the SBBI series that had been widely used for many years. Another listener asked about valuation dates, and the presenters showed that your valuation date can go back to any date in the past.

Try it free: The Cost of Capital Professional is available to all practitioners on a free trial basis until the end of 2018. After that, it will be made available on a subscription basis. To sign up for the free trial, click here. BVR welcomes feedback and comments from all users.