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2015 Valuation Handbook - Guide to Cost of Capital

Author: Duff & Phelps
Publisher: Wiley
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Duff & Phelps is now providing the data previously in the SBBI Valuation Yearbook, as well as data from the Risk Premium Report, in this handbook – all to help you estimate the cost of equity capital for a subject company.

This Valuation Handbook contains all of the “key variables in estimating the cost of capital,” including:

  1. Yields
    • Long-term (20-year) U.S. Treasury Coupon Bond Yield
  2. Equity Risk Premium
    • Long-horizon expected “historical” equity risk premium
    • Long-horizon expected “supply side” equity risk premium
  3. Size Premium
    • CRSP Mid-Cap, Low-Cap, and Micro-Cap size premia
    • CRSP Deciles 1 through 10 size premia
    • Size premia for the breakdown of CRSP Decile 10 into 10a (and its subdeciles 10w and 10x) and 10b (and its subdeciles 10y and 10z)
  4. Industry Risk Premium
    • Industry risk premia (IRPs) for use in the build-up method (previously found in Table 3-5 in the SBBI Valuation Yearbook).

This Valuation Handbook also includes all of risk premia and size premia (for up to eight different measures of “size”) previously published in the Duff & Phelps Risk Premium Report, including:

  1. Size Study
    Analyzes the relationship between equity returns and company size, using up to 8 measures of company size (market value of common equity, book value of common equity, 5-year average net income, market value of invested capital (MVIC), total assets, 5-year average EBITDA, sales, and number of employees).
  2. Risk Study
    Analyzes the relationship between equity returns and accounting-based fundamental risk measures
  3. High-Financial-Risk Study
    Analyzes the relationship between equity returns and high-financial-risk, as measured by the Altman z-Score.
About the Authors

Duff & Phelps provides objective and independent assessments of value for organizations. Their finance and accounting expertise, combined with its use and development of sophisticated valuation methodologies, fulfills even the most complex financial reporting and tax requirements. They constantly monitor changing regulations and consistently provide input to the Financial Accounting Standards Board and the International Accounting Standards Board as they develop implementation guidance and new financial reporting rules with valuation implications.

Duff & Phelps also performs tax valuations and related consulting in accordance with the regulations and guidance established by the Internal Revenue Service and other taxing authorities. Duff & Phelps valuation opinions are fully defensible and documented to withstand scrutiny from the SEC or other regulatory bodies.

Quarterly Updates Available!
Receive one year of updates to supplement the IRPs in the Valuation Handbook:

  1. Data through March PDF emailed by Wiley in May
  2. Data through June PDF emailed by Wiley in August
  3. Data through September PDF emailed by Wiley in November
The updates for approximately 250 U.S. industries include three industry risk premiums that are used in the "build-up" method of estimating cost of equity capital. Be sure to add on product # PBV1502PDF to your cart to receive these timely updates!

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