Archive 2022-169: Cost of Capital Dispute: Damodaran vs. Kroll Cost of Capital Navigator vs. BVResources Cost of Capital Professional – What Is Right and What Is Wrong?
**Webinar 169: Live Broadcast Date: July 21, 2022, 1:00-3:00 pm EDT**
VPS StraightTalk Webinar Series: Cost of Capital Dispute: Damodaran vs. Kroll Cost of Capital Navigator vs. BVResources Cost of Capital Professional – What Is Right and What Is Wrong?
Speaker: Jim Hitchner, CPA/ABV/CFF
Do you use:
- Standard and Widely Used Cost of Capital Models and Data?
- Build Up Model?
- Modified CAPM?
- Total Beta?
- Historical Equity Risk Premium?
- Supply-Side Equity Risk Premium?
- Normalized Risk-Free Rate?
- Size Premium?
- Company-Specific Risk?
Then you will want to hear Dr. Aswath Damodaran’s severe criticisms of these valuation concepts and learn what is valid and what is not.
Dr. Damodaran has been speaking this spring about inflation and valuation and shared his strong opinions. Just in recent weeks he has said:
- Historical equity risk premium? “I know many of you swear by the Duff & Phelps historical risk premiums. I haven’t used a historical risk premium in valuation in almost 30 years, so I am not in your camp.”
- A “normalized” risk-free rate? “It starts with the risk-free rate and none of this dancing around normalized risk-free rates. It is the actual risk-free rate. This is not something you can normalize because it’s not yours to normalize.”
- The size premium? “You know what I think about the size premium, right? It is this nice fiction that Duff & Phelps has fed into, and every analyst uses when there has been no size premium. It’s the biggest bunch of crap I’ve seen in valuation that people keep doing over and over and over and over again.”
- Company-specific risk premium? “Its absolute [expletive] and I won’t mince words. It’s nonsense.”
- Total beta? “I mean, 30 years ago I concocted this measure that I’m sorry I concocted in hindsight called total beta. It’s being sold by other people.”
Previously he has been quoted:
- Build up models are “recipes for disaster.”
- “Even if you believe that small cap companies are more exposed to market risk than large cap ones, this is a sloppy and lazy way of dealing with that risk …”
- “… it seems foolhardy to put your faith in mean reversion and past data …”
Damodaran’s criticisms are in direct conflict with the models and data widely used from the Kroll Cost of Capital Navigator and BVResources’s Cost of Capital Professional. In this webinar, Jim Hitchner will help you understand the arguments and determine what is acceptable to use.
The participant will learn:
- What is right and what is wrong – Damodaran, Kroll, or BVResources
- The ins and outs of each database
- How each of the databases and information are created
- How to support your models and data
Copy of the VPS webinar PowerPoint slides
- Hardball with HItchner_Issue 3_January 2021
- Hardball with Hitchner_Issue 14-15_Dec21Jan22
- Hardball with Hitchner_Issue 20_June 2022
- Access to a video recording of the program.
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