Utilizing the Implied Private Company Pricing Model: The Cost of Capital Wizard
BVR's Webinar Series
Wednesday, March 5, 2014
10:00am-11:40am PT • 1:00pm-2:40pm ET
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In November 2013 Bob Dohmeyer and Rod Burkert presented a new approach to cost of capital estimation for private businesses whose revenues are less than $150 million. That approach, the Implied Private Company Pricing Line (IPCPL) uses small private company transaction data to solve directly for the cost of capital for a typical risk private company with $150 million or less in revenue.
In this webinar Dohmeyer, Burkert, and fellow IPCPL co-creator Peter Butler present The Implied Private Company Pricing Model, or IPCPM. This model, a derivation of the IPCPL, is a response to requests from appraisers that Dohmeyer, Burkert, and Butler develop a model that adjusts the IPCPL for companies with outlier fundamental characteristics and which allows for a departure from the IPCPL line.
- The build-up method: peeling the onion
- Pepperdine survey
- The company specific risk premium issue
- The small stock premium issue
- The IPCPL: A way forward
- IPCPM: The solution
- Market clearing price beta
- Liquidity and debt capacity
- The IPCPM in practice
- Learn how inherent flaws make the build-up method unreliable
- Learn how the IPCPL functions as an estimation of cost of capital for small sized companies
- Learn how the IPCPM allows the application of the IPCPL to a wider variety of target companies and valuation situations
- Learn how the IPCPM and IPCPL seek to provide a more reliable, less subjective determination of cost of capital
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