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Which ERP camp are you in? Please take our survey.

When you drive your car, should you look through your windshield or the rearview mirror?

BVU News and Trends September 2019

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

20- and 10-year spot yields on T-bonds favored for risk-free rate

Two-thirds of survey respondents say they use the spot yield on Treasury bonds for their risk-free rate when developing an estimate for the cost of capital, according to BVWire’s latest survey.

Early survey results on risk-free rates of choice

Preliminary results from our latest cost of capital survey reveal that the spot yield on the 20-year U.S. Treasury bond is most often used as the basis for the risk-free rate.

Part 2 of our cost of capital survey: risk-free rates

Please take part in the second in our series of short surveys to investigate how appraisers derive cost of capital in their valuations of private companies.

Interesting results from our cost of capital survey

A significant number of valuation experts look to the private capital markets when estimating the cost of capital for a private firm, according to a BVWire survey.

Should business valuators use ‘implied’ equity risk premiums? Damodaran says yes

The free, 11th annual update to ‘Equity Risk Premiums (ERP): Determinants, Estimation and Implications—The 2019 Edition’ is now available from Professor Aswath Damodaran (New York University Stern School of Business).

‘We’re killing ourselves!’ with cost of capital complexity

That was the cry of one attendee at the NACVA conference in Salt Lake City during a session titled “The Cost of Capital Conundrum.”

Reminder: Take our cost of capital survey

Our thanks to those of you who took the first in a series of short surveys to investigate how appraisers derive cost of capital in their valuations of private companies.

Damodaran posts 2019 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 2019 Edition.”

Participate in BVWire’s cost of capital surveys

BVWire is a conducting a series of short surveys to investigate how appraisers derive cost of capital in their valuations of private companies.

Industry betas now included in CCPro platform

Users of BVR’s new Cost of Capital Professional (CCPro) platform now have the choice of two sources of industry betas to help in estimating the industry risk premium (IRP) component of the buildup method for developing the cost of capital for a private company.

Two Articles Addressing Firm Quality and Its Impact on the Size Effect

The authors discuss two recent papers that present the concept of firms’ quality and show that it plays an important role in understanding the size effect. Also discussed are papers that present a differing view.

No End in Sight to Size Effect Debate

A look at several recent articles on the so-called size premium that perpetuate the debate on this topic. Some appraisers feel that the size effect has diminished or disappeared since it was first documented in 1981, while others feel it is alive and well.

BVU News and Trends May 2019

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

BVU News and Trends April 2019

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

Latest paper on the vanishing size effect

A new academic paper, “Why Has the Size Effect Disappeared?,” explores the disappearance of the small-firm effect after the early 1980s.

Do you have a Rube Goldberg cost of capital process?

Wildly complicated gadgets designed to do very simple tasks was the specialty of Rube Goldberg, the Pulitzer Prize-winning cartoonist, sculptor, author, engineer, and inventor.

The Legend of Weighted Average Return on Assets and Benchmarking Purchase Price Allocation Data

The author's research shows that only current assets, non-competes, and customer relationships have any predictability to WACC in limited industries. In general, when intangibles have significance, their coefficients are negative, which reduces WACC and implied risk. This finding supports the claim by Lev and Gu (2008) that intangibles are important assets, which reduce, not increase risk. The concept that intangible always should have a premium above WACC is unfounded, and the premise of ARM 34 that intangibles are ancillary assets is outdated. The author suggests and alternative method to use purchase price allocation data to support the selection of premiums above WACC.

Upgrade to the Cost of Capital Professional highlights free webinar

A number of new enhancements to BVR’s Cost of Capital Professional platform were explained during a recent free webinar on March 6.

Paper says CEO wealth affects company risk

There is evidence that, as CEOs become wealthier, they take less risk with their firms to the detriment of shareholders, according to a new paper.

Global BVU News and Trends March 2019

Business valuation news from a global perspective.

BVU News and Trends March 2019

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

Bygone size effect resurfaces in highly volatile times, per new research

Although most empirical studies find that the size effect has disappeared since the early 1980s, it shows up during times of high macroeconomic volatility, according to a new paper.

Global BV News: Capital budgeting decision-making in Pakistan

Pakistani-listed firms are using discounted cash flow methods of capital budgeting and preferring net present value over internal rate of return, according to a research paper.

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