16 / October 2013

BVR announces plan to replace and enhance terminated Morningstar cost of capital products

Posted in: BVWire News Written by: David
Categories: cost of capital equity risk premia industry analysis
Tags: beta cost of capital equity risk premium (ERP) industry risk premium morningstar risk analysis roger grabowski SBBI

Morningstar's announcement two weeks ago that it discontinued the Cost of Capital Resource Center, the SBBI Valuation Edition, and its beta and industry "tear sheets" has left a temporary gap for business appraisers. BVR plans to continue these key resources.

First, the Duff & Phelps Risk Premium Calculator and Reports will be expanded to include industry risk premia, additional small-company cost of capital tables, and other features. Roger Grabowski (Duff & Phelps) discussed possible improvements Monday at the ASA Advanced Business Valuation Conference in San Antonio.

Those familiar with the Morningstar SBBI Valuation Edition should also take heart: It will be replaced by the new 2014 BVR Enhanced Valuation Yearbook, available in March to coincide with the normal annual release from Morningstar. This new version will continue the familiar SBBI calculations but will include liquidity analyses and more frequent updates than past editions. BVR is currently assembling a team to manage this transition without interruption to SBBI customers, CEO David Foster reports.

Additionally:

  • Historical industry and beta "tear sheets" will continue to be available, it's believed, at the Morningstar site. A new BVR/D&P Cost of Capital Calculator is also in the works to allow appraisers the ability to calculate current or historical peer group beta or industry discount rate.
  • The Cost of Capital Yearbook will also be replaced in the second quarter of 2014.
  • A new Duff & Phelps International Risk Premium Report is in the works with a hopeful release date early in the 2nd Q. This will replace and enhance the Ibbotson annual international study for those who need country-specific discount rates.
  • Other cost of capital-related products including Grabowski and Pratt's Cost of Capital, fifth edition, will be available from BVR as well.

"Our aim is to release the new BVR Cost of Capital Center in early January, to guarantee uninterrupted service for those customers who rely on the discontinued Morningstar products," says Foster. "After January, we hope to continue to add improvements and new products, and we're looking forward to working with the business valuation community on all the future enhancements."

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