Pete Butler sent this response to our item on private cost of capital methods last week:

“The total beta technique eliminates the problematic issues of the CAPM and BUM.  While I respect what the Private Cost of Capital does … use of publicly-traded data can be based on timely (specific) empirical data (the Butler Pinkerton Calculator) and not based on (general) expectations every six months. Moreover, investors in private companies have a choice to invest in private companies or publicly-traded stock.  The law of substitution (alternative investments) requires us to look at publicly-traded data, at least in my opinion.  Public disclosures of risk in Forms 10-K provide outstanding feedback for appraisers to compare/contrast with their subject company. So, while the PCOC may be another interesting tool to add to an appraisers' toolbox, this appraiser will never abandon publicly-traded stock data.”