Abstract

The traditional capital asset pricing model and buildup method have failed to adequately quantify the required rates of return for equity holders. This paper discusses how profoundly business appraisers, the courts, investors, auditors, and the general public have been misled into thinking that these methods are valid, and suggests a way forward.

Abstract

Earnouts have become an increasingly prominent component of transaction consideration. At the same time, fair value accounting requirements have heightened the need to value them, as well as other forms of contingent consideration. While several models have been developed to value contingent consideration, there has been less debate about how to set important model parameters, such as the discount rate. This article provides one simple method of selecting a discount rate for the valuation of earnouts and other contingent consideration.

Abstract

The individual customer accounts associated with customer relationship intangible assets represent a grouped population where the application of mathematical techniques can be used to describe customer population life expectancy. Statistical methods founded in actuarial science and reliability engineering recognize the retirement and life expectancy dispersion inherent in customer populations when estimating population life characteristics. Statistical techniques that measure customer retirement behavior are useful in portraying customer population life expectancy, while recognizing the specific variability of life characteristics among individual customer accounts.

I read the article “Regression Analysis and Discounts for Lack of Marketability” (BVR, Spring 2011, Vol. 30, No. 1) and found it relevant, well written, and generally interesting given the importance of discounts for lack of marketability in much of the appraisal work that we as appraisers do.

I had some follow up questions/comments regarding this study and forwarded them on to the authors. The questions/comments that I had were as follows;

Seems odd that the regression predicting the log closing price would have a much higher R² than the regressions predicting the private placement discount. Seems like you should

Editor's Column

Economic Observations

The Biggest Business Valuation Myth

Abstract

Valuing Contingent Consideration: Discount Rate Selection

Abstract

Actuarial Methods, Survivor Curves, and Customer Remaining Useful Life Estimation

Abstract

From the Chair

Letter to the Editor

Volume 30, Issue 3

From the Editor

Customer Concentration: Good, Bad, or Ugly?

From the Chair

Delaware Valuation Decisions, 2021 to 2024

Volume 44, No. 1 — Complete Issue