BV News and Trends April 2024
A monthly roundup of key developments of interest to business valuation experts.
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.
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.
Update on guidance regarding the company-specific risk premium
Expect to see an exposure draft of guidance on the company-specific risk premium during the first half of 2024, reported Christopher Armstrong (KPMG), at the winter edition of the ASA’s Fair Value Conference last week.
BV 2023, Year in Review: Top 10 List
The year 2023 was full of change. How have high interest rates and market volatility impacted the cost of capital and minority discounts? What were some of the top cases impacting business valuation? What does the new lease accounting standard mean for valuations? What has changed in tax regulation? In this webinar, we highlight 10 major topics that impacted business valuation in 2023 and discuss implications to valuators in the upcoming year.
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.
Global BVU News and Trends August 2023
Business valuation news from a global perspective.
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.
Global BV News: New edition of Valuation and Common Sense by Fernandez
The eighth edition of Valuation and Common Sense by Professor Pablo Fernandez (IESE Business School, University of Navarra) is now available—and it’s free if you click here.
Feedback Wanted on New Model for Small Firm Risk
A variation of the multiattribute utility model (MUM) used along with Monte Carlo simulation forms the basis of a new model for estimating a company-specific risk premium (CSRP) for small, closely held businesses. Excel templates are available from the model’s developer, David Goodman (Jesson, Oslin & Associates), and feedback is welcome.
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.
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.
BV News and Trends February 2023
A monthly roundup of key developments of interest to business valuation experts.
Damodaran examines impact of inflation on profitability
In his fifth data update for 2023, Professor Aswath Damodaran (New York University Stern School of Business) focuses on trends in company profitability in 2022, including the impacts of inflation.
A Hybrid Approach to Determining Company-Specific Risk
This webinar will first explain the theoretical reasoning as to why a company-specific risk premium is necessary for a small business when using the buildup method to estimate the cost of capital. I will then present a hybrid approach using the multiattribute utility model to quantify the company-specific risk premium. Finally, I will show how to incorporate Monte Carlo simulation into the model to determine the range of potential company-specific risk premium. Attendees will have ...