The Cost of Equity Capital (Part II of II) This is the second of a two-part series article focused on issues that arise estimating the cost of equity capital. In most forensic-related valuation analyses, one procedure that affects most valuations is the measurement of the present value discount rate. This discount rate analysis may affect the forensic-related valuation of private companies, business ownership interests, securities, and intangible assets. This discussion summarizes three models that analysts typically apply to estimate the cost of equity capital component of the present value discount rate: (1) the capital asset pricing model, (2) the modified…
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The Cost of Equity Capital (Part I of II) This is the first of a two-part series article focused on issues that arise estimating the cost of equity capital. In most forensic-related valuation analyses, one procedure that affects most valuations is the measurement of the present value discount rate. This discount rate analysis may affect the forensic-related valuation of private companies, business ownership interests, securities, and intangible assets. This discussion summarizes three models that analysts typically apply to estimate the cost of equity capital component of the present value discount rate: (1) the capital asset pricing model, (2) the modified…
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Observations and Delaware Fair Value (Part II of II) This is the second of a two-part article, read Part I here, that focuses on empirical evidence supporting the size premium adjustment, observations regarding the CRSP size premium 10th decile category, liquidity issues that may account for the size premium, and certain Delaware Chancery Court decisions involving a size premium discussion. In this second part, the author focuses on the latter two points. These are discussed since in the past few years there have been numerous fair value business valuation related disputes decided by the Delaware Court of Chancery that involved…
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Observations and Delaware Fair Value (Part I of II) This is a two-part article that focuses on empirical evidence supporting the size premium adjustment, observations regarding the CRSP size premium 10th decile category, liquidity issues that may account for the size premium, and certain Delaware Chancery Court decisions involving a size premium discussion. These are discussed since in the past few years there have been numerous fair value business valuation related disputes decided by the Delaware Court of Chancery that involved certain cost of equity capital postulates. Valuation analysts should be aware of potential issues related to incorporating a size…
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