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Novel Beta Method Occasions Rebuke From Court of Chancery in Appraisal Case

In appraisal proceeding, Court of Chancery adopts petitioner expert’s DCF-based model for calculating fair value, making slight adjustment to expert’s size premium; on beta calculation, court finds respondent expert’s novel approach “does not survive judicial scrutiny” and raises Daubert issues.

Implied ERP at 5.2% per Damodaran’s data update

Professor Aswath Damodaran (New York University Stern School of Business) has done 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.

Coster v. UIP Companies, Inc.

In breach of fiduciary duty action, court says stock sale passes enhanced fairness review; appraiser valuing real estate investment services company before sale is eminently qualified and knowledgeable about industry; capitalized cash flow method “generated a reliable indicator” of company’s value.

Valuation Underlying Controversial Stock Sale Satisfies Highest Scrutiny

In breach of fiduciary duty action, court says stock sale passes enhanced fairness review; appraiser valuing real estate investment services company before sale is eminently qualified and knowledgeable about industry; capitalized cash flow method “generated a reliable indicator” of company’s value.

The most common error in DCF analyses? Following the recipe.

Pablo Fernandez, the professor of finance at IESE Business School, remains one of the most thoughtful observers of business valuation practices.

Pablo Fernandez on common errors using WACC

A new paper presents a real valuation a well-known investment bank performed using two usual methods that are supposed to provide the same value.

New Meta-Analysis Study Reveals Diminished Size Premium

There have been many studies on the size premium but with conflicting results. Now, the first “meta-analysis” of the size premium provides an estimate that is smaller than what many people believe, according to a new paper.

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.

BVU News and Trends December 2019

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

Research paper finds the size premium mostly nonexistent

“Investors require no premium to hold small stocks over big stocks in normal times,” says a recently updated paper on the size premium.

BVR and Duff & Phelps Cost of Capital Platforms Go Head-to-Head at VSCPA

Both platforms give similar results when estimating the cost of capital for private firms. They were put through their paces at a recent conference presented by the Virginia Society of CPAs.

D&P lowers its normalized risk-free rate to 3.0%

Duff & Phelps has decreased its U.S. normalized risk-free rate from 3.5% to 3.0% effective 30 September 2019, the firm says in a statement.

BVU News and Trends October 2019

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

D&P lowers its normalized risk-free rate to 3.0%

Duff & Phelps has decreased its U.S. normalized risk-free rate from 3.5% to 3.0% effective Sept. 30, 2019, the firm says in a statement.

Larger listed companies barely outperform smaller ones now, a new study argues

Published research has overstated the size premium, says ‘Firm Size and Stock Returns: A Quantitative Survey,’ a new analysis conducted by Anton Astakhov, Tomas Havranek, and Jiri Novak from the Institute of Economic Studies at Charles University in Prague.

New meta-analysis study finds diminished size premium in stock returns

The debate over the size premium in stock returns has raged for years, with no consensus over the magnitude or stability—or even the existence—of the size premium. There have been many studies on the size premium but with conflicting results.

How should business valuers measure country risk when revenues originate outside of the UK?

Aswath Damodaran (New York University Stern School of Business) continues to provide country risk comparisons on his website.

Is Your Cost of Capital Data Backing You Into a Corner?

In a recent court case, the valuation expert tried to use professional judgment but the data being used did not support her opinion. The expert could not adequately explain why she chose not to go where the data led her.

First-ever face-off of cost of capital platforms

BVR’s Cost of Capital Professional and the Duff & Phelps Cost of Capital Navigator went head-to-head for the first time, headlining the annual two-day conference of the Virginia Society of CPAs.

Concerns Over Data Security in Online Cost of Capital Tools

Business Valuation Update attended the recent NYSSCPA business valuation conference in New York City where several attendees expressed concerns about entering sensitive client data into online tools for estimating the cost of capital. The providers of the Duff & Phelps Cost of Capital Navigator and BVR’s Cost of Capital Professional respond to these concerns.

BVU News and Trends August 2019

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

Survey: Most appraisers look backwards for ERPs

The historical approach (ex post) is the preferred approach in estimating the equity risk premium (ERP), according to 76% of respondents to our latest survey.

Cost of capital platforms topline Virginia conference September 19-20

BVWire will be heading to Glen Allen, Va., for the Business Valuation, Fraud & Litigation Services Conference on September 19-20, sponsored by the Virginia Society of CPAs.

Ex post approach for ERP favored in early survey results

Our latest minisurvey on the cost of capital reveals that the historical approach (ex post) is the preferred approach in estimating the equity risk premium (ERP), cited by 75% of respondents.

Trial offer for BVR’s online cost of capital tool

If you haven’t checked out BVR’s new Cost of Capital Professional, now’s the time to do it.

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