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
Systemic Methodology Calculates Size Premiums
Building on the recent equity risk premium study we presented (BVU, Nov. 2005) and one of our latest telephone conferences (Top Controversies in Determining Cost of Capital, Feb. 1, 2006), this article offers a new method to ‘smooth over’ the debate on a ...
Musings on the Cost of Capital
A veteran appraiser presents an interesting retrospective on the cost of capital and offers some observations on current practice.
Global BVU News and Trends March 2019
Business valuation news from a global perspective.
Work File Checklist for Discount Rates Applicable to Various Assets
A practice aid based on the Mandatory Performance Framework (MPF) for the Certified in Entity and Intangibles Valuation (CEIV) credential.
The Adjusted Present Value: An Alternative Approach to the Effect of Debt on Business Value
The market value of a business’ assets is equal to the value of its two funding sources, debt and equity. In their seminal work, Modigliani and Miller’s1 Proposition 1 asserts that in a perfect market and ignoring income taxes, the relative amount of deb ...
How to Estimate WACC for a Cross-Border Valuation
One of these days, you will be asked to value a company located in a foreign country. One of the first questions you will have is: How do I estimate the discount rate? Of course, the overall concept is the same as for a U.S. valuation, but you need to ref ...
S corporation versus C corporation values
In this article on the topic of C versus S corporation values, Chris Mercer addresses problems and choices for the appraiser in the aftermath of three controversial court decisions ( Gross v. Commiss ...
Using the Butler Pinkerton Calculator: A Case Study
In our valuation practice, we often find ourselves valuing privately held companies where the investor and the pool of likely buyers for the investment are not well-diversified. We have found the Butler Pinkerton Calculator (BPC) to be a great tool in dev ...
Input Needed to Develop New Guidance on Company-Specific Risk
This is an update on new guidance being developed by The Appraisal Foundation’s Business Valuation Resources Panel’s Work Group on Company-Specific Risk Premia (CSRP). It needs input from practitioners on this topic.
Risky Business: A Generous Helping of Company-Specific Risk
A potential exists for valuation analysts to overestimate the company-specific risk premium when valuing small businesses. For purposes of this discussion, company-specific risk and unsystematic risk are used interchangeably. “Small business” is defined ...
IPCPL Developers Field Queries on the New Model’s Underlying Data
In the September 2013 issue of Business Valuation Update, we presented a new method designed to be more reliable in estimating the cost of capital for a privately held business with revenues less than $10 million. The method, known as the implied private ...
Response to Eric Nath’s Comments on the Cost of Capital Professional
Comments in response to the need to develop a “truly forward-looking required rate of return system that gives appraisers an understanding of how to estimate cost of capital for private companies and interests in private companies.”
Cost of capital controversies: It’s time to look behind the curtain (Part 3 of 3)
The authors provide a very lucid and readable discussion of the specific company risk and beta components of the cost of capital.
Valuing Natural Gas Rights in Shale Formations: A Case Study
The appraisal of natural gas rights constitutes the valuation of an intangible asset that is a location-related, real property right. These intangible assets can be leasehold interests, possessory interests, exploration rights, use rights, development rig ...
Valuing companies with changing debt levels; Is the APV method better than the DCF?1
In this article, Mark presents the Adjusted Present Value (APV) method—an alternative to the DCF for companies with debt-to-equity ratios that are expected to change in the future.
The Probability-Weighted Expected Return Method: A Critique
Each year, business appraisers use the Probability-Weighted Expected Return Method (PWERM) to value tens of billions of dollars worth of private company common stock and common stock options. PWERM is one of the three approaches set for by the AICPA’s P ...
The valuation of a financially distressed enterprise
Download(70k/PDF) the full article with exhibits. Bankruptcy filings continue to break historic records. Total filings in calendar year 2002 were 1.6 million, up nearly 6% from 2001, and the asset ...
Arriving at FMV Conclusion for Energy Properties Requires Engineering Expertise
The oil and gas sector is one of the hottest in the M&A market, driven by a strong demand for upstream assets. But valuing these assets, in particular oil and gas reserves that can be neither seen nor physically measured until produced for sale, presents ...
A Look Back: Including ESG in Valuation Models
Quantified the impact of environmental, social, and governance (ESG) factors and measuring their effects is not a new phenomenon. Thanks to the BVResearch Pro platform, here are two ways experts have done this before.
An In-Depth Look at the New D&P Valuation Handbook
The SBBI Valuation Yearbook from Morningstar Inc. and the Duff & Phelps Risk Premium Report were the two most common resources utilized by valuation professionals for estimating the cost of capital through 2013. In September 2013, Morningstar Inc. announ ...
The Implied Private Company Pricing Line 2.0 K0 = (FCFF1 / P) + g
Most business appraisal assignments are for private companies with revenue less than $10 million. Current costs of capital (K0) estimation methods rely almost entirely on public security returns. Small privately held companies are different from public eq ...
Ongoing Research Related to the S Corp Valuation Puzzle
A significant breakthrough has been made in the area of valuations of pass-through entities. The research presented in an important new book allows valuation analysts to make informed inferences to arrive at reasonable valuation conclusions for PTEs. Howe ...
The Other Side of Kohler: IRS Expert Offers Insights
In light of recent public discussion of the Tax Court’s decision in Kohler v. Commissioner, we think it important to further explain some of the facts and findings. We also believe that valuation specialists will benefit from a healthy debate on the sali ...
BVU Profile: Newest BVU Editorial Board Member Is a Strong Advocate of Education
One of the busiest people at the recent AICPA FVS conference was Harold G. Martin Jr., who is the partner-in-charge of Valuation and Forensic Services for Keiter, a CPA and consulting firm located in Richmond, Va. Not only did he teach the ABV Exam Review ...
How the New QBI Deduction Impacts the Hypothetical Buyer and Seller
Part 1 of a two-part article on the impact of the new tax law’s Qualified Business Income (QBI) deduction for pass-through entities in determining estimated after-tax cash flow at the investor level, as well as the related change in the fair market value of the entity.