Appraiser Newsroom

MAY 1, 2024

Insurance industry terminology such as risk, premium, loss, deductibles, coverage limits, and perils are some of the fundamental concepts appraisers must grasp. Register for ASA’s PP163 Property Insurance Fundamentals: What Appraisers Need to Know webinar on June 6, 2024 from 2:00-3:00 PM EDT, presented by Thomas Dawson, ASA.

Appraisal 52

Appraisal Risk Premium Marketability 52

Musings on Markets

JANUARY 8, 2022

Risk Premiums : You cannot make informed financial decisions, without having measures of the price of risk in markets, and I report my estimates for these values for both debt and equity markets. I extend my equity risk premium approach to cover other countries, using sovereign default spreads as my starting point, at this link.

Risk Premium 91

Risk Premium Start-ups Market Capitalization Corporate Finance 91

Musings on Markets

JANUARY 30, 2023

Just as rising equity risk premiums push up the cost of equity, rising default spreads push up the cost of debt of companies, with the added complication of higher default risk for those companies that had pushed to the limits of their borrowing capacity in a low interest-rate environment. in 2022, higher than the 1- 1.5%

Treasury 74

Treasury Start-ups Risk Premium Equity 74

Valutico

SEPTEMBER 13, 2023

SMEs can present challenges with DCF due to limited historical financial data, unreliable information, inadequate financial forecasts, and difficulty in determining terminal value. Approximations, negotiations, and considering illiquidity premiums help mitigate these challenges. Why Are SME Valuations So Unique and Challenging?

Discounted Cash Flow 52

Discounted Cash Flow Comparable Company Analysis Asset-based Approach Intangible Assets 52

ThomsonReuters

APRIL 7, 2021

Financial statement presentation. As you prepare your financial projections ahead of submitting your loan application package or investor presentation, you want to avoid gaps that require explanation, as they tend to suggest weaknesses in your business. Financial statements are the next step in trying to put a number on your worth.

Risk Premium 71

Risk Premium Business Valuation Equity 71

Musings on Markets

JANUARY 21, 2023

The premium that investors demand over and above the risk free rate is the equity risk premium , and practitioners in finance have wrestled with how best to estimate that number, since it is not easily observable (unlike the expected return on a bond which manifests as a current market interest rate).

Equity 70

Equity Risk Premium Start-ups Dividends 70

Musings on Markets

JANUARY 9, 2021

The Data As more data has become publicly available, and access to the data becomes easier, the challenge that we face in investing and valuation is that we often have too much data, and information overload is a clear and present danger.

Risk Premium 52

Risk Premium Market Capitalization Equity Start-ups 52

Equilest

MARCH 17, 2022

Methods of business valuation by their profitability are presented below. Presentation of the profitability method to evaluate a company Attractions and limits of the method of multiples to value a company How to conduct a company valuation based on profitability? 11% per year. 10% per year.

Business Valuation 40

Business Valuation EBIT EBITDA Discounted Cash Flow 40

Simply Treasury

AUGUST 2, 2022

The definition of "net equity" is as follows: equity of the company = sum of subscribed capital, share premiums, revaluation reserves, reserves and retained earnings, minus the tax value of the company's holdings in associated companies and the tax value of its own shares. risk premium if the company is an SME as defined by European law).

Equity 52

Equity Risk Premium Banking Finance 52

Musings on Markets

JANUARY 20, 2021

Note that nothing that I have said so far is premised on modern portfolio theory, or any academic view of risk premiums. It is true that economists have researched risk aversion for centuries and concluded that investors are collectively risk averse, and that the level of risk aversion varies across age groups, income levels and time.

Risk Premium 52

Risk Premium Risk-free Rate Equity Dividends 52

Chris Mercer

MARCH 7, 2024

” The hypothetical valuation presented in Mercer’s Musings #2 and “solved” in Mercer’s Musings #3 considered a significant number of factors in developing marketability discounts for two dissimilar, 10% interests in two identical companies. We do so in the context of alternative returns for similar investments.

Dividends 52

Dividends Appraisal Terminal Value Marketability 52

Equilest

JULY 10, 2023

The income approach focuses on estimating the present value of expected future cash flows. Market volatility, regulatory changes, interest rate fluctuations, tenant turnover, and project-specific risks are examples of factors that can impact a company's value. The asset-based approach assesses the company's net asset value.

Business Valuation 40

Business Valuation Asset-based Approach Risk Premium Price to Earnings 40

Equilest

JULY 10, 2023

The income approach focuses on estimating the present value of expected future cash flows. These factors include market volatility, interest rate fluctuations, regulatory changes, tenant turnover, and property management risks. Common approaches include the income approach, market approach, and asset-based approach.

Business Valuation 40

Business Valuation Asset-based Approach Risk Premium Price to Earnings 40

Equilest

JULY 10, 2023

Market volatility, regulatory changes, interest rate fluctuations, environmental concerns, and construction risks are some examples of factors that can impact a business's value. Assessing and quantifying these risks helps determine an appropriate discount rate or risk premium when calculating the business's present value.

Business Valuation 40

Business Valuation Risk Premium Marketability Finance 40

Musings on Markets

AUGUST 15, 2023

By the same token, an investment that delivers a guaranteed return over ten years will not be risk free to an investor with a six month time horizon. Expected returns for Risky Investments : The risk-free rate becomes the base on which you build to estimate expected returns on all other investments.

Risk-free Rate 80

Risk-free Rate Treasury Risk Premium Start-ups 80

Andrew Stolz

MARCH 20, 2020

The formula implies the return an investor expects from a risk-free investment plus the return from the stock in relation to market volatility. The market risk premium is calculated from a market rate of return less a risk-free rate. Lower WACC can increase the present value of a firm.

Beta 52

Beta Capital Structure Risk-free Rate Weighted Average Cost of Capital 52

Equilest

JUNE 10, 2023

This method considers the projected cash flows generated by the tax preparation business and applies an appropriate capitalization or discount rate to determine the present value. Factors such as multiples, beta, and equity risk premium are required for accurate calculations.

Business Valuation 40

Business Valuation Fair Market Value Marketability Technology 40

Equilest

JUNE 13, 2023

Methods such as discounted cash flow (DCF) analysis and capitalization of earnings are commonly used to determine the present value of expected future cash flows. Factors such as multiples, beta, and equity risk premium are required for accurate calculations.

Business Valuation 52

Business Valuation Asset-based Approach Appraisal Intangible Assets 52

ThomsonReuters

MAY 6, 2021

A discounted cash flow approach is a type of “income approach” or “present value technique,” two terms used frequently in the FASB Accounting Standards Codification®. The adjustment added to the risk-free rate to arrive at the risk-adjusted rate is often referred to as the “risk premium.”

Discounted Cash Flow 52

Discounted Cash Flow Risk-free Rate Risk Premium Intangible Assets 52

Musings on Markets

FEBRUARY 16, 2024

Investors will either see more relative risk (or beta) in these companies, if the risks affect an entire sector, or in equity risk premiums, if they are market-wide. Applications : My argument for using implied equity risk premiums is that they are dynamic and forward-looking.

Risk Premium 74

Risk Premium Start-ups Beta Marketability 74

Musings on Markets

FEBRUARY 27, 2023

An Optimizing Tool In my second and third data posts for this year, I chronicled the effects of rising interest rates and risk premiums on costs of equity and capital. In computing the latter, I used the current debt ratios for firms, but made no attempt to evaluate whether these mixes were "right" or not.

Equity 52

Equity EBITDA Start-ups Net Debt 52

Musings on Markets

JANUARY 12, 2021

I also offer online classes in basic finance (present value, risk models and measures) and accounting (or at least my version of it) as background to my main classes. By the end of the class, my objective is not to sell you on the best philosophy but to provide you with a framework where you can find the philosophy that best fits you.

Corporate Finance 52

Corporate Finance Start-ups Finance Marketability 52

Musings on Markets

JANUARY 26, 2023

In this section, I will begin by looking at the evolution of my Tesla value from 2013 to 2021, and then present my updated valuation of the company. My Tesla History I have valued Tesla multiple times over the last decade, and while I have been wrong at each turn, I have tried to learn from my mistakes.

Start-ups 80

Start-ups Marketability Risk Premium Equity 80

Valutico

OCTOBER 20, 2022

The DCF method takes the value of the company to be equal to all future cash flows of that business, discounted to a present value by using an appropriate discount rate. A discount rate, or discount ‘factor’, is calculated and applied to each year’s cash flow, in order to arrive at the present value. . Does this make sense?

Discounted Cash Flow 52

Discounted Cash Flow Terminal Value Weighted Average Cost of Capital Net Present Value 52

Musings on Markets

MARCH 28, 2022

Risk Surge and Economic Viability : In my last post, I noted the surge in Russia's default spread and country risk premium, making it one of the riskiest parts of the world to operate in, for any business.

Start-ups 113

Start-ups Alpha Marketability Risk Premium 113