Case Studies in Contingent Consideration
A significant component of the transaction price in an M&A or buyout transaction often consists of proceeds that are “contingent” upon the target company’s achievement of certain performance targets after the closing has taken place. From the perspective of the seller, “contingent consideration” represents the right to receive additional assets or equity interests from the buyer (earnout), or the obligation to return part of the proceeds from the transactions (clawback) if specified future events occur ...
Specific company risk factor
In Dr. Pratts book, there is (page 76) "The Specific Risk Factor" and the "Expanded CAPM Cost of Capital Formula." This is a very basic question: The use of the expanded model, which include ...
Demystifying the user of beta in the determination of the cost of capital and an illustration of its use in Lazard's valuation of Conrail
The Journal of Corporation Law , Winter 2000, Vol. 25 This article discusses deriving the figure for beta (a measure of a security's sensitivity to market movements) in valuing capital budgeting ...
Cost of Equity Capital and Model Mispricing
"Cost of Equity Capital and Model Mispricing," Pástor, Lubo and Robert F. Stambaugh, Journal of Finance , February 1999, pp. 67-114. The cost of equity, the expected rate of return on a firm's sto ...
New size premiums allow for differences in systematic risk
Steven A. Albright inquired about two different numbers for the size premium based on Roger Ibbotson s work for SBBI . I have had the same question, as ValueSource Pro by John Wiley ...
Building better betas is Ibbotson's answer to beta controversy
Several recent research studies have provided significant support for two interesting hypotheses regarding betas: The lag effect: For all but the largest companies, the prices of individu ...