Business Valuation Update
- How to Review a Report’s Valuation Methodology
- Ideas for Solving Two Problems in the BV Profession
- How Do Your Firm’s Benefits Stack Up?
- Using Rule of Thumb Data to Uncover Cooked Books
2003 AICPA BV conference brings record attendance - Part 4
The 2003 AICPA National Business Valuation Conference took place in Phoenix, Arizona. Find part 1 of this article in the March 2004 issue; part 2 in the April 2004 issue; and part 3 in the M ...
Excellent speakers and varied topics at the AICPA’s 2004 business valuation conference (Part 4 of 5)
The AICPA’s 2004 National Business Conference took place at the JW Marriott Orlando Grande Lakes Resort in Orlando, Florida (November 7-9, 2004).
IBA Conference
n The court appointed expert Darrell V. Arne, CBA, ASA, CPA, CBI Arne & Co. Albuquerque, NM Darrell emphasized that there is a demand for court-appointed experts, courts and litig ...
Valuing Community Newspapers: Small Publications’ Success Fuel Opportunities for BV Experts
Stories of “doom-and-gloom” in the world of large newspapers are now common. The Star-Ledger, New Jersey’s largest newspaper, cut its newsroom staff by 40 percent last October. The New York Times reported that the cuts were “one of the largest reductions ...
Short but pithy IBA 2005 business valuation conference (Part 3 of 3)
The IBA 2005 Business Valuation Conference was held at the Wyndham Palace Resort & Spa in Orlando, Florida (May 4-7, 2005).
Fair Value: An Imperfect System Produces Flawed Results, Damodaran Says
When it comes to fair value for financial reporting, many business valuation experts are over a barrel. There is a reason for the conundrum: “If you put good people into a flawed system, you will get bad results,” Aswath Damodaran, professor of finance an ...
Alternative Equity Risk Premium measures unstable; lack robust predictive power Part 2 of 2 parts
Last issue we reported on controversy about the current level of the Equity Risk Premium, as debated at Ibbotson Associates’ first ever Cost of Capital and Equity Risk Premium conference held in Chicago June 5 and 6. The most commonly used estimate of the equity risk premium as a component of the required rate of return (discount rate) is the actual realized historical average over some time period. However, some have attempted to measure the ...
Assessing the BV ‘Standards’ Issue Raised by the SEC Advisory Committee Report
Among practicing business appraisers, comparative tables like those appearing in this issue of BVU have a nuts-and-bolts kind of utility. For one thing, our standards provide templates for the preparation of valuation reports. They also provide answers t ...
The Valuation Profession—A Brief History
The need to value items reaches far into antiquity. Plato (427 - 347 B.C.) described the concept of value as one of the most difficult questions. His pupil, Aristotle (384 - 322 B.C.), teacher of Alexander the Great, believed that the value of an object w ...
Top Experts Talk ‘Best Practices’ in Valuing Intangibles For Financial Reporting
It’s one of the top growth areas for BV analysts—valuing intangible assets for financial reporting, and recently we gathered three of the leading authorities in this relatively new and nuanced area for a roundtable of “best practices” and valuation techni ...
Valuing Earnouts in Uncertain Times: an Overview of FAS 141R Requirements
FAS 141R s requirements related to the valuation of contingent consideration present new opportunities as well as new challenges for valuation specialists. Although the number of FAS 141R engagements may not increase compared to those under FAS 141, their scope will enlarge if there is contingent consideration. In addition, clients and auditors will have a difficult time understanding and testing the accuracy or reasonableness of the values that analysts derive for earnouts, especially when complex methods ...
Cost of Equity Capital and Model Mispricing
"Cost of Equity Capital and Model Mispricing," Pástor, Lubo and Robert F. Stambaugh, Journal of Finance , February 1999, pp. 67-114. The cost of equity, the expected rate of return on a firm's sto ...
Estimating Discount Rates in Damages Analysis: Solving The Analyst’s Dilemma
The estimated discount rate can have a significant impact on the calculation of value or lost profits. However, merely “plugging in” empirical data into a formula, without understanding: (1) the inputs to, and (2) the framework of the discount rate calcul ...
Debt and Equity Weightings in WACC
Evans introduces the formula below to simplify the iteration process when employing the single period capitalization method. The formula solves for the fair market value of equity based on independent factors that are generally known in advance by the valuation professional.
Beta size adjustments
One can use a beta size adjustment to calculate the additional return requirements of investors in small companies when risk and return is estimated by reference to the metrics of larger companies.
Reviewed by Shannon Pratt
Ibbotson Associates is coming out with a new Valuation Edition of their 1999 annual Stocks, Bonds, Bills and Inflation. The book will be available in March, with data through 1998, for $12 ...
Stocks, Bonds, Bills and Inflation: Valuation Edition
Reviewed by Shannon Pratt Ibbotson Associates is coming out with a new Valuation Edition of their 1999 annual Stocks, Bonds, Bills and Inflation. The book will be available in March, wit ...
PPMC discount rate jumps from 12.97% to 16.35%; total PPMC market capitalization plummets 70.1%
We first introduced our readers to Physician Practice Management Companies in the May 1996 issue of Business Valuation Update . At that time, guest interviewee Rick Holdren considered the medical p ...
Valuing Intangible Assets Now Available!
Valuing intangible assets is a discipline that is critically important to business appraisers and others interested in valuing businesses and business interests. As it should, the sophistication of the business valuation profession is increasing at an exponential rate.
Ibbotson Authors Discuss Historical and Supply Side Estimates of ERP
Editor’s Note: This article clarifies the differences between methods of calculating ERP; expands upon the derivation of supply side ERP; demonstrates that both the historical and supply models yield similar, not contradictory, results; and introduces so ...
Cost of Capital Should Align With the Broad Market Conditions as of the Valuation Date
Editor’s note: Marc Vianello introduced his observations regarding the problems associated with conventional methods of calculating cost of capital under volatile market conditions in the January issue of BVU. This article presents one possible methodolog ...
Appraiser Uses Direct Way to Estimate Private-Company Cost of Equity
One appraiser, after 25 years and over 1,000 valuations of small owner-operated businesses, says that these firms bear no relation to public companies, so why look to the public markets for data when estimating cost of capital? Here’s the method he uses, which looks directly at the private capital markets and does not require any expensive resources.
IPCPL and Margin Reversion: Implications for the Valuation of Small Privately Held Companies
The implied private company pricing line (IPCPL) model is a consistent marketimplied approach to measure the cost of capital for private companies. Its key element is the cost of capital for the smallest private companies, derived from Pratt's Stats info ...
Global BVU News and Trends May 2023
Business valuation news from a global perspective.
An In-Depth Review of the Duff & Phelps Risk Premium Calculator
The Duff & Phelps Risk Premium Calculator is an online tool used to calculate the cost of equity capital. The Calculator allows valuation professionals to enter inputs relevant to the specific valuation date and to the subject company being valued and yie ...