Peter Butler (Valtrend LLC) presented total beta theory and the Butler Pinkerton Calculator™ (BPC) at the Arizona Society of CPAs’ Business Valuation Conference earlier this month. “Total beta is a better way to quantify discount rates for privately-held companies because it captures total risk,” says Butler. Total beta assumes a completely undiversified investor (or pool of completely undiversified investors). “Is this a good assumption?” he asked the audience. “It depends on the assignment,” he answered. Butler acknowledges the controversy surrounding total beta and the BPC, and suggests using the BPC as one of many tools to determine COC.
Two recent articles about BPC are now available on the BVR website: “Total Beta and the Butler Pinkerton Calculator: An Anthology” and “Total Beta - An International Perspective: A CanadianExample.” For more information about the BPC click here.
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