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COE Estimates From Leading Data Sets Are All ‘Very Close’

Jim Hitchner conducted a hypothetical engagement using Kroll’s Navigator, BVR’s Cost of Capital Professional, the Pepperdine study, and Damodaran’s data to estimate cost of equity (COE).

BV News and Trends February 2023

A monthly roundup of key developments of interest to business valuation experts.

BV News and Trends January 2023

A monthly roundup of key developments of interest to business valuation experts.

High ESG scores lower the cost of capital, study finds

A recent paper says there is significant evidence that companies having a higher environmental, social, and governance (ESG) score have a lower cost of capital.

Business Valuation Update Yearbook, 2023 Edition

January 2023 PDF, Softcover (426 pages)

BVR (editor)

Business Valuation Resources, LLC

It's that time of year again, BVR's “greatest hits” publication is here!  The Business Valuation Update Yearbook 2023 covers the previous year’s most groundbreaking and thought-provoking advancements in valuation.  It captures changes in regulations and professional standards, key takeaways from professional conferences, and tactical practice-building ideas. This critical desktop reference puts you ahead of the competition with on-the-ground reporting by the BVR editorial team including an Introduction by Andy Dzamba, BVR Executive Editor and insights from notable BV experts. Learn more >>

Damodaran posts his data update for 2023

At the beginning of each year, Professor Aswath Damodaran (New York University Stern School of Business) generously posts a great amount of data on his website that include risk-free rates, equity risk premiums (ERPs), corporate default spreads, corporate tax rates, country risk premiums, and other data—all of which are free.

BV News and Trends December 2022

A monthly roundup of key developments of interest to business valuation experts.

Firm nimbleness as a measure of risk

Investors perceive firms with higher levels of inflexibility, such as not being able to scale operations or adapt to changes in profitability, as being riskier and have a higher implied cost of equity, researchers conclude in a new paper.

Ang Offers SSBV Members More Evidence of the Lack of a Size Effect

Clifford Ang (Compass Lexecon), who offered an impassioned plea to a large group from the UK’s Society of Shares and Business Valuers (SSBV), has become one of the leading proponents of eliminating or minimizing the traditional size premia. Ang has written a number of articles on the size effect and has a new book, Applied Valuation, due out early next year.

Estimating the Extra Risk of Customer Concentration

Interesting comments were made by Roger Grabowski (Kroll), who conducted a session at the American Society of Appraisers International Conference. He discusses the research in this area and how to examine the customer concentration of guideline public companies.

BV News and Trends November 2022

A monthly roundup of key developments of interest to business valuation experts.

Inflation showcased in lead-off session at the AICPA FVS conference

As this issue rolls off the (virtual) presses, BVWire is attending the AICPA & CIMA Forensic and Valuation Services Conference.

Competition keeps cost of capital platform prices down, experts believe

That’s the feeling of a panel of veteran valuation experts who presented at the recent Forensic and Valuation Conference hosted by the Virginia State Society of CPAs.

Inflation, volatility trigger increase in ERP, per Kroll

Kroll has increased its recommended U.S. equity risk premium (ERP) from 5.5% to 6.0% when developing USD-denominated discount rates as of Oct. 18, 2022.

Another call to discard CAPM

“Unfortunately—and I write this with a heavy heart—the CAPM is not just imperfect; it is so badly wrong that it is best ignored,” writes Ivo Welch (UCLA Anderson Graduate School of Management) in an article “The Cost of Capital: If Not the CAPM, Then What?”

BV News and Trends September 2022

A monthly roundup of key developments of interest to business valuation experts.

Nath comments on Hitchner v. Damodaran

The author of a number of seminal articles on control premiums, minority interest valuation issues, and cost of capital, Eric Nath (Eric Nath & Associates) comments on a recent article in Business Valuation Update.

Let's Get Real About the Dividend Growth Model

The dividend growth model, sometimes called the dividend discount model or discounted cash flow model, is a commonly used tool for estimating the cost of equity capital, particularly in the context of utility rate setting and unitary appraisal. Although the assumption of constant growth in perpetuity is almost never realistic, the constant growth version of the model is still commonly used in practice. However, given modern computing technology, there is no reason not to use ...

BV News and Trends August 2022

A monthly roundup of key developments of interest to business valuation experts.

Hitchner rebuts Damodaran’s attacks on cost of capital inputs

Just keep on doing what you’re doing with cost of capital, advises Jim Hitchner (Valuation Products and Services), despite what academics say.

Trugman’s Approach to Assessing Company-Specific Risk

This is an excerpt from the new sixth edition of Understanding Business Valuation, which has a companion website that includes a good selection of full sample valuation reports and other supporting material.

BV News and Trends June 2022

A monthly roundup of key developments of interest to business valuation experts.

Butler comments on Damodaran’s ‘dynamite’ remarks regarding COE

Last weeks’ issue covered some very choice words (some of which we can’t print here) Aswath Damodaran (New York University Stern School of Business) made about various inputs some analysts use to determine the cost of equity (COE).

Comment on COE data sources survey

In last week’s issue, we reported on a survey of the data sources analysts use to estimate the cost of equity (COE) (click here to see the news item).

Hitchner surveys COE data sources of choice

The Kroll (formerly Duff & Phelps) Navigator has been the consistent clear choice for cost of equity (COE) data by valuation analysts, according to ongoing surveys by Jim Hitchner (Valuation Products and Services).

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