BV News and Trends April 2024
A monthly roundup of key developments of interest to business valuation experts.
Today! Free webinar on BVR’s cost of capital platform
Find out why over a third of survey respondents use BVR’s Cost of Capital Professional platform during a free webinar today, April 17, from 10:00 a.m. to 11:40 a.m. PT (1:00 p.m. to 2:40 p.m. ET).
Review of Surveys on Cost of Capital Data Sources and Inputs
The Kroll Cost of Capital Navigator continues to be widely used and accepted for estimating cost of equity (COE). But BVR’s Cost of Capital Professional has been gaining considerable steam since its launch in 2018, according to a BVR survey. Some other resources for estimating the cost of capital have also seen an uptick in usage.
BV News and Trends March 2024
A monthly roundup of key developments of interest to business valuation experts.
Kroll-recommended ERP remains at 5.5%—for now
The latest cost of capital infographic from Kroll has the firm’s recommended U.S. equity risk premium reaffirmed at 5.5% when developing USD-denominated discount rates.
Lower ERP likely for 2024, predicts Kroll
One of the “pivotal” trends for 2024 is a likely drop in the equity risk premium (ERP), predicts Kroll in its list of “10 Trends Shaping 2024.”
Damodaran posts his second data update for 2024
Focusing on the equity markets in the U.S. and across the world, Professor Aswath Damodaran (New York University Stern School of Business) has posted his second data update of 2024.
Damodaran posts his first data update for 2024
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.
Kroll conducts survey of cost of capital inputs
In the last issue, we presented results of several surveys on the various resources practitioners use for estimating cost of capital.
BVR survey reveals COE data sources of choice
While the Kroll Cost of Capital Navigator continues to be widely used and accepted for estimating cost of equity (COE), BVR’s Cost of Capital Professional has been gaining considerable steam since its launch in 2018, according to a BVR survey.
Update on Current Inputs for Valuations Amid High Inflation
Carla Nunes and Jim Harrington, both with Kroll, present two very helpful charts on long-term inflation expectations and projections for long-term real GDP growth. The charts include the sources for developing the estimates.
Hitchner Updates the Risk/Return Spectrum for Cost of Capital
A good visual to use for checking the reasonableness of your cost of capital estimate is the spectrum of rates in the market. Jim Hitchner (Financial Valuation Advisors Inc.) has done an update to this spectrum, which can be used in valuation reports and in court.
Practical Considerations in Normalizing the Risk-Free Rate
Some valuation firms and practitioners have advocated that the risk-free rate of return (Rf) should be normalized when it is believed to be too low because of Federal Reserve Bank policies. Recent arguments for doing so have been based on technical economic analyses but have ignored practical aspects of normalizing Rf. This article is intended to address those practical considerations.
BV News and Trends August 2023
A monthly roundup of key developments of interest to business valuation experts.
BV News and Trends June 2023
A monthly roundup of key developments of interest to business valuation experts.
Kroll lowers recommended ERP to 5.5%
Kroll has decreased its recommended U.S. equity risk premium (ERP) from 6.0% to 5.5% when developing USD-denominated discount rates as of June 8, 2023.
BV News and Trends May 2023
A monthly roundup of key developments of interest to business valuation experts.
Cost of Capital Navigator now has a company-level beta module
Kroll has added a new module to its Cost of Capital Navigator that allows users to estimate their own industry CAPM betas by providing levered, unlevered, and relevered individual company betas.
New Country Risk Data Update Reminds Valuers of Factors to Consider
A data update from Aswath Damodaran (New York University Stern School of Business) helps valuation experts explain how they considered each of the risk factors in assessing value for business assets located outside of the U.S.
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.
BVU News and Trends April 2023
A monthly roundup of key developments of interest to business valuation experts.
Damodaran posts 2023 edition of ERP paper
The “dean of valuation,” Professor Aswath Damodaran (New York University Stern School of Business) has posted “Equity Risk Premiums (ERP): Determinants, Estimation and Implications—The 2023 Edition.”
BV News and Trends March 2023
A monthly roundup of key developments of interest to business valuation experts.
Size effect is hibernating, per new paper
The size premium is more significantly related to monetary policy than to firm quality or to business cycle troughs, according to a new paper.
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).