Common Sense Issues in the Cost of Capital

Posted on 12.22.15

Harold G. Martin, Jr., CPA/ABV/CFF, ASA, CFE Partner, Valuation & Forensic Services

As the business valuation profession grows, both in terms of size and depth of experience, many are digging deeper into the assumptions and theory of business valuation. Studies of previously reviewed or new sources of empirical evidence are analyzed for better insights into market behavior that can be applied to specific valuation assignments. The subject of the cost of capital provides no better example of this. Shannon Pratt’s Valuing a Business, second edition, published in 1989, contains a 16-page chapter on cost of capital, as well as five pages in one other chapter and nine pages in yet another chapter. Twenty-five years later, his 2014 Cost of Capital, fifth edition, co-written with Roger Grabrowski, is a hefty 1,311 pages. But even with all this information at our disposal, do we always get it right? Access full article.

Source: ©2015 Building Value

.....................

Harold Martin_1406_880Harold is the Partner-in-Charge of Keiter’s Valuation and Forensic Services Group. He is also a member of Keiter’s Executive Committee.  He has over 30 years of experience and specializes in business valuation and forensic accounting, including financial investigations and litigation consulting and expert witness services.  Full Bio | Publications

The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.