When was the last time anyone read Revenue Ruling 59-60? “You should be reading it once a month,” Gary Trugman told AICPA BV attendees. “Every time I read it, I find something new. It’s an amazing document.” It’s even more amazing that it came from the government. “They got something right,” he said. This timeless, seven-page document is now among the free valuation downloads at BVResources.
What analysts are still struggling to get right: determination of a company-specific risk premium in the development of an appropriate discount rates, the topic of Trugman’s talk. “There’s a new kid on the block that’s worth looking at,” he said, referring to the Butler Pinkerton Model™ Company-Specific Risk and TCOE Calculator™, which Trugman reviewed in last week’s BVWire and also helped rename, adding the “total cost of equity” (TCOE) element. “This is the first time that we as appraisers can calculate TCOE for public companies based on Total Beta,” he explained, referring to the concept developed by Prof. Aswath Damodaran. The calculations are only as good as the selection of guideline public companies, but even without good comparables, the model can calculate industry COE. “What an addition to the profession,” Trugman said. “This is neat stuff,” and it’s now available at BVResources.
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