BV529 The Size Premium: Fact or Fiction Should It Still Be Used in Your Valuations?
The use of a size adjustment when estimating the cost of capital for a small firm has become common practice in business valuations. However, the application of a size premium is not without controversy. In this webinar, we will go back to basics and provide support to why valuation professionals can continue to make use of a size adjustment in their valuations
- What is the size effect?
- Does the size effect still exist?
- How is size measured?
- Criticisms of the size effect and selected counter-arguments
- Case Study - How to use the data in Kroll’s Risk Premium Report using:
- The Capital Asset Pricing Model (CAPM)
- Various Build-up Approaches
Upon webinar completion, the participant will be able to:
- Describe the size effect;
- Identify different ways to measure the size effect;
- Recognize criticisms of the size effect and list counter-arguments; and
- Apply size adjustments to a cost of equity estimate using the Capital Asset Pricing Model, as well as different specifications of the build-up model.
Valuation (financial reporting, tax, litigation, fairness opinions) professionals, Corporate Development teams, Controllers, Financial Planning & Analysis (FP&A) teams, Investment Banking professionals, Private Equity professionals
Carla S. Nunes | Kroll
Carla Nunes is a managing director in the Office of Professional Practice (OPP) of Kroll, based in the Philadelphia office, and a Kroll Institute Fellow. She has over 25 years of experience. In her OPP role, she provides firm-wide technical guidance on a variety of valuation, financial reporting and tax issues. She is also the global leader of Kroll’s Valuation Digital Solutions group, which produces the cost of capital thought leadership content and data housed in the Cost of Capital Navigator.
James P. Harrington | Kroll
James Harrington is a Director at Kroll and provides technical support on client engagements involving cost of capital and business valuation matters. He is a leading contributor to Kroll’s efforts in the development of studies, surveys, online content and tools, and firmwide valuation models. James is co-author of the “Valuation Handbook” series with colleagues Carla Nunes and Roger Grabowski and is a contributing author to Cost of Capital.
Review of this session recording will award 2 CE hour(s).
CPE credit is not awarded for this pre-recorded offering.