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Pepperdine private cost of capital survey is open

A BVWire poll found that 40% of respondents use the Pepperdine Private Capital Markets Reports for estimating small private-company cost of capital.

Reminder: Take the Pepperdine private cost of capital survey

The Pepperdine Private Capital Markets Project conducts an annual survey of expected rates of return with respect to private companies.

Pepperdine private cost of capital project is back up and running

On the brink of ending its long run, the Private Capital Markets Project from Pepperdine University has secured funding to continue its ongoing survey of expected rates of return of providers in the private capital market.

New paper on IBOR reform and valuation

For many years, interbank-offered rates (IBORs) have set the benchmark rate for lending on an unsecured basis.

Damodaran updates cost of capital data

Professor Aswath Damodaran (New York University Stern School of Business) has started his annual posting of data updates on his website that include risk-free rates, equity risk premiums, corporate default spreads, corporate tax rates, country risk premiums, and other data—all of which is free.

YE2020 data are now in the Cost of Capital Professional

Year-end 2020 data, including equity risk premia, CRSP decile size premia, and industry betas/IRPs, are now available in BVR’s Cost of Capital Professional platform.

New Research Paper Joins Call to ‘Let Go’ of the Size Premium

A look at the latest paper that joins mounting academic research over the recent past that shows that the size effect no longer exists—or was never there in the first place.

Hitchner poll reveals COEC sources of choice

The January 2021 issue of Hardball With Hitchner includes the results of polls that reveal what sources valuation practitioners use for developing cost of equity capital (COEC) estimates.

Business Valuation Update Yearbook, 2021 Edition

January 2021 Hardcover, PDF

BVR (editor)

Business Valuation Resources, LLC

Always a highly-anticipated annual publication, the Business Valuation Update Yearbook 2021 covers the year’s most groundbreaking and thought-provoking advancements on valuation methodologies in the face of a global pandemic.  It also captures, changes in regulations and professional standards, key takeaways from the best virtual conferences, and tactical practice-building ideas. This critical desktop reference puts you ahead of the competition with on-the-ground reporting from valuation experts, thought-leaders, and BVR’s expert editorial and legal teams. Learn more >>

Vanguard stock market forecast implies a U.S. ERP of 3% to 5%

Annual returns of U.S. stocks over the next decade are forecasted to be in the “modest 3.7%-5.7% range,” according to a recent market outlook report from Vanguard.

D&P reduces recommended U.S. ERP to 5.5%

Duff & Phelps has decreased its recommended U.S. equity risk premium (ERP) from 6.0% to 5.5% for use as of Dec. 9, 2020, according to a client alert.

D&P enhances infographic on cost of capital

Duff & Phelps has updated its infographic, “Cost of Capital in the Current Environment,” and has enhanced it with new data on the eurozone.

The Absence of a Size Effect: Letting Go Of The Size Premium

Many valuation practitioners believe that there is a size effect and add a size premium to their CAPM cost of equity. In this talk, Cliff Ang will demonstrate why the underlying premise behind the size effect no longer holds and discuss the academic literature and empirical evidence on the absence of a size effect. He then dives into the related issue, which is why valuation practitioners should let go of the size premium.

‘The “Normalized” Risk-Free Rate: Fiction or Science Fiction?’

That’s the title of a new paper from Pablo Fernandez, a professor in the department of financial management at the University of Navarra—IESE Business School in Spain.

Article says the size effect didn’t vanish—it never existed

The hits keep coming to the existence of the size effect.

What’s the current UK market risk premium?

Finding—and supporting—a precise cost of capital for UK valuations presents many challenges, but a thoughtful analyses by Reuters at least provides some context.

Latest paper in the size-effect debate

Some appraisers believe that the size effect has diminished or disappeared since it was first documented in 1981.

Global BV News: New module added to Duff & Phelps Cost of Capital Navigator

A new international industry benchmarking module will be available in late October for the Duff & Phelps Cost of Capital Navigator.

Duff & Phelps Cost of Capital Navigator adds international industry benchmarking module

The new international industry benchmarking module (available in late October) provides subscribers with comprehensive global industry-level statistics for approximately 90 industries in four global regions, with data to support valuation dates from March 2015 to the present.

D&P offers infographic on cost of capital amid COVID-19

Which financial market and economic indicators did Duff & Phelps take into consideration when it arrives at its recommended U.S. equity risk premium and accompanying normalized risk-free rate?

The Market Price of Risk: Quantifying a COVID-19 Equity Risk Premium Using High-Yield Bond Pricing

The authors demonstrate how a high-yield option-adjusted spread is used when doing appraisals of private companies while considering the market volatility and economic slowdown caused by the COVID-19 pandemic.

D&P lowers U.S. normalized risk-free rate to 2.5%

Duff & Phelps has decreased its recommended U.S. normalized risk-free rate from 3.0% to 2.5% for use as of June 30, 2020, according to a client alert.

Using a size premium could trigger Daubert trouble, says new article

Adding a size premium to the cost of equity could make an expert’s testimony subject to a Daubert challenge, says Clifford Ang (Compass Lexicon) in a recent article.

More concern about the validity of the size premium factor

Most business valuers consider a size premium when calculating cost of capital for financial reporting purposes.

New business valuation resource from Professor Fernandez captures low market returns

Pablo Fernandez continues to release research that may assist UK business valuers working on reports with valuation dates in Q1 2020.

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