The implied private company pricing line is a new tool for estimating the cost of capital for small private companies. Feedback from the BV community has been positive, but some commenters have pointed out that, while IPCPL is fine for average companies, what if the subject company is not average—and what if it’s not in the same industry? How do you adjust for these factors? The IPCPL developers have introduced the implied private company pricing model (IPCPM), which will allow users to move off the IPCPL (line-size adjusted average). The model is the only specific private company cost of capital model that is indexed directly to the IPCPL cost of capital. It facilitates adjustments from the IPCPL size-based indication for comparable differences in: (1) systematic risk (i.e., beta); (2) diversifiable and total risk (i.e., total beta); (3) liquidity; and (4) debt capacity.
Learn more: The developers will conduct a webinar, Utilizing the Implied Private Company Pricing Model: The Cost of Capital Wizard, on March 5. Robert Dohmeyer (Dohmeyer Valuation Corp.), Peter Butler (Valtrend), and Rod Burkert (Burkert Valuation Advisors) will explain how this exciting new model works in estimating cost of capital for companies whose revenues are less than $150 million.
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