LinkedIn BV-forum update

BVWireIssue #103-2
April 13, 2011

LinkedIn’s business valuation-related groups are increasingly popular forums for questions—though as with any social media, skill is required to sort through the best thoughts. Here’s a sampling of current questions posted during the past week:

  • Business Valuation Professionals group
    • “How does utilizing a mid-year convention change the build-up of a capitalization rate? What would the calculation be? What adjustments would I make to my cap rate to properly reflect a mid-year convention?”
    • “What are you doing with respect to adding a premium to the cost of debt (in a WACC calculation) for the purpose of estimating the cost to the principal(s) for providing their personal guarantees? Pratt, Hitchner, and Trugman all mention this, but there is little/no empirical evidence to support the amount of the premium.”
  • Business Valuation & Advisory Network group
    • I've heard that several methods exist in current appraisal practice: type of treasury method, assume conversion at current price, etc. In the OPM method, specifically, when allocating the value to common equity shareholders, how is the option pool to be granted handled (that is, how are the un-granted shares which will be granted over the horizon to the liquidation event included in the model)?
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