Overview
A premium resource for determining discount rates, the Risk Premium Report provides equity risk premiums for companies sized by eight different criteria:
- Market capitalization
- Book value
- Net income
- Market Value of Invested Capital
- Total assets
- EBITDA
- Sales
- Number of employees
The underlying data for the Risk Premium Report is drawn from both the CSRP and Compustat databases, covering 42 years (1963 – 2005) years of financial reports from companies listed on the New York Stock Exchange, the NASDAQ and the AMEX.
The Risk Premium Report (originally the Standard & Poor's Corporate Value Consulting Equity Risk Premium Report) is produced annually by Duff and Phelps LLC, a leading provider of independent financial advisory and investment banking services. The Report is authored by Roger Grabowski, a managing director of Duff & Phelps, and David King, managing director of Mesirow Financial.
In selecting the data for their analysis, the authors have segregated high risk companies into a separate “portfolio” and de-selected companies de-listed from their exchanges and other companies whose data would tend to skew the risk premium curve (companies with 5 year negative EBITDA, companies with less than 5 years reported data, etc.). The remaining companies are then divided into 25 “portfolios” based on size, using eight alternate measures for size.
The ValuSource Difference – Risk Premium AnalyzerLike other vendors, ValuSource distributes the Risk Premium Report as an Adobe Acrobat (.pdf) file. ValuSource has made the Risk Premium Report even easier for the valuator to use by adding the Risk Premium Analyzer Tool, which includes:
- Data: All the Risk Premium Report Exhibits data (including regression formulas) is loaded into the Risk Premium Analyzer Excel workbook.
- Analyzer Tool: The Risk Premium Analyzer Tool automatically calculates three risk premiums for your subject company for each size parameter you enter: Build-Up Model, CAPM, and an additional size premium.
Why you need the Risk Premium Report and Risk Premium AnalyzerThe Duff and Phelps Risk Premium Report has gained wide acceptance as a source of risk premium data and should also be considered, along with SBBI, in the process of determining accurate and defensible risk premiums. Using the ValuSource Risk Premium Analyzer, you will have access to a powerful new source for determining appropriate risk premiums for your valuation engagements.
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