RESEARCH UPDATE: Monthly Recap of Research Papers October 2024
The featured paper is from 2021 but escaped our radar. The authors are Lauren A. Cooper (West Virgina University), James A. DiGabriele (Montclair State University), Richard A. Riley, and Trevor L. Sorensen (West Virgina University). Other papers examine an algorithm for PE IRR, assessing macroeconomic risk, global economic recovery from COVID, and the payment timing of deferred income taxes.
Letter to the Editor: Feedback on Paper Concerning Company-Specific Risk
Comments on a recent research paper as it relates to Total Beta and the Butler Pinkerton Calculator.
Don’t Be Afraid to Use a High Discount Rate in Your DCF for Early-Stage Firms
A case study of a recent engagement is another example of how challenging it can be to determine the enterprise value of an early-stage company because of the significant uncertainties that surround these firms. The article includes sources of data used for developing a discount rate.
The Continuing Evolution of the BUM
The author provides some very interesting reflections and perspectives, drawn from over 40 years of experience, and brings us up to date on this long-lasting method.
RESEARCH UPDATE: Monthly Recap of Research Papers September 2024
The featured paper is “Pricing Innovation: The Anchoring Effect in Patent Valuation” by P.E.N.G.F.E.I. Wang (BI Norwegian Business School). Other papers of interest to valuation experts cover topics including valuing startups, how marijuana legalization impacts cost of equity, and earnings growth rates.
Valuation Report Excerpts Using Pepperdine to Estimate a Discount Rate
Sample language adapted from actual valuation reports using information from Pepperdine’s “2024 Private Capital Markets Report” to estimate cost of capital for a small business, including an adjustment for company-specific risk.
RESEARCH UPDATE: Monthly Recap of Research Papers August 2024
The featured paper is “How to Bring AI-Enabled Valuations to Meet Professional Duty of Care Standards?” by researchers from the University of Auckland. Other papers of interest to valuation experts cover topics including valuing startups, ESG impact on multiples, valuations of business development companies (BDCs), and inflation impacts on the CAPM.
BV News and Trends August 2024
A monthly roundup of key developments of interest to business valuation experts.
Global BVU News and Trends August 2024
Business valuation news from a global perspective.
Retain Professional Judgment in Your Cost of Equity Estimates
Amid the barrage of emerging technology, artificial intelligence, and automated valuation models, there is a concern in the profession about the “black box” phenomenon of using these tools. Dr. Michael Crain (Florida Atlantic University), the author of the Cost of Capital Professional platform, talks about this with Ron Seigneur (Seigneur Gustafson LLP) during a demo of the platform.
RESEARCH UPDATE: Monthly Recap of Research Papers July 2024
The featured paper is “Beyond Subjective Weights—Risk Aware Reporting of Valuation Results for a Privately Held Business” by Mikhail Munenzon (InteleK Business Valuation & Advisory). Other papers of interest to valuation experts cover topics including ERPs and risk-free rates, valuation of data assets, quantitative disclosures and risk, and the impact of founder-family succession on firm value.
Global BVU News and Trends July 2024
Business valuation news from a global perspective.
Kroll lowers recommended ERP to 5.0%
Kroll has decreased its recommended U.S. equity risk premium (ERP) from 5.5% to 5.0% when developing USD-denominated discount rates as of June 5, 2024.
BVU Cost of Capital Center adds more Pepperdine info
Starting with the August issue of Business Valuation Update, information on rates used in practice for company-specific risk, industry risk premia, and the size premium will be included in the monthly Cost of Capital Center.
2024 Pepperdine report is now available
The 2024 edition of Pepperdine’s annual survey of expected rates of return with respect to private companies is now available (for free, thanks to continued financial support).
New feature in Business Valuation Update spotlights research
To promote more of a connection between valuation practice and financial research, BVR’s monthly Business Valuation Update now includes a recap of research and scholarly papers that should be of interest to valuation experts.
Size and Capitalization Adjustments for Market-Based Pricing Multiples
This program will start by reviewing the elements of a pricing multiple. Specifically, we explore the components that makeup capitalization rates. By breaking down the modified CAPM, we explain how differences in size and capitalization can be incorporated directly into pricing multiples. We then walk through a prebuilt model that automatically applies these pricing multiple adjustments.
Global BV News: Fernandez’s survey of 2024 risk premiums and risk-free rates
The results of Professor Pablo Fernandez’s latest survey of the market risk premiums and risk-free rates used in 96 countries in 2024 is now available.
Global BV News: CFA Institute issues Kroll’s global cost of capital 2023 summary edition
The CFA Institute Research Foundation has put out the “Valuation Handbook—International Guide to Cost of Capital 2023 Summary Edition” from Kroll.
Global BVU News and Trends May 2024
Business valuation news from a global perspective.
Preview of TAF guidance on the company-specific risk premium
In the last issue, we mentioned that auditors are looking for more quantification of the company-specific risk premium.
Auditors need to see more quantification of company-specific risk
One of the major audit review issues is company-specific risk (CSR), revealed a panel of Big Four leaders at the recent ASA Fair Value Conference in New York City last week.
Reminder: Take the IVSC survey on ESG
To investigate the evolution of how environmental, social, and governance (ESG) factors are being incorporated into the valuation process, the International Valuation Standards Council has launched a survey.
Key Points From Hitchner’s Annual BV Update
A recap of Jim Hitchner’s look at the major issues in BV over the past year, including long-term growth rates, the three-stage DCF, normalizing the risk-free rate, cost of capital, plagiarism, lack of liquidity on a 100% interest, and more.
BV News and Trends April 2024
A monthly roundup of key developments of interest to business valuation experts.