Users of BVR’s new Cost of Capital Professional (CCPro) platform now have the choice of two sources of industry betas to help in estimating the industry risk premium (IRP) component of the buildup method for developing the cost of capital for a private company. CCPro provides a simple and transparent way to estimate cost of capital with data similar to the original Ibbotson SBBI data.
The two sources of betas are those published by: (1) the “dean of valuation,” Professor Aswath Damodaran (New York University Stern School of Business); and (2) Salvidio & Partners, a Rome, Italy-based business valuation firm headed by Ascanio Salvidio. CCPro already includes some of Dr. Damodaran’s data library, such as the implied ERP, implied ERP with sustainable payout, and the Damodaran historical ERP. For more information on these two sources of beta, go to the FAQ pages on the CCPro webpage.
If you choose to use an IRP, there are a number of factors to consider, including how the data were developed, whether the sample size is sufficient, and whether the companies represented are truly comparable. If you feel that the published IRP is not appropriate, the CCPro platform allows you to enter a custom beta.
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