Frequently Asked Questions |
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Frequently Asked Questions |
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The Analyzer is an online tool that will help the user develop Cost of Equity (COE) estimates specifically tailored for the user and their subject company. The user will choose the methods most appropriate in the Analyzer and the other methods will be excluded causing a more relevant Cost of Equity. The Anlalyzer utilizes empirical data from the Duff & Phelps Risk Premium Report.
A one-year subscription to the Calculator can be purchased containing data from the current year and the prior year. The book must be purchased in addition to the subscription to the analyzer and will have the current year data presented in the risk premium report exhibits.
Depending on the user inputs, the outputs include a summary of your cost of equity estimates in an Excel workbook with the individual methods shown on the tabs or just the individual methods shown on the tabs. The output is a fully editable workbook downloaded to the user’s computer.
The year represents the year the book with the data was published. Both the current book’s data and the immediate past year book’s data are available in the Analyzer. Please note that the “data through” comment indicates that the results presented in those books are for the previous year end.
The Anlyzer default setting is the “Premia List”. This allows a user to get the data used in their cost of equity models with the user model being the most paramount. However, if a cost of equity (without a company specific premia or non-systemic risk being identified) is desired, change item 1 to Cost of Equity and the risk free rate input will open.
The ERP convention allows the user to accept the convention used in calculating the study or to normalize the ERP. The ERP adjustment will automatically be calculated in the output results.
For the Size Study, only 1 of the 8 inputs is required since they are independently calculated, but it is recommended that you use as many inputs as are available to you for best results. Please note that the size is assumed to be in whole dollars and is not rounded in thousands or millions. For instance, total assets is input as 345,647 if a subject company has three hundred forty five thousand and six hundred fory seven dollars of assets.
One of the adavantages of the Analyzer is that only the methods the user chooses, and furthermore, only the inputs that are requred for that method are input. Please refer to the book to see the details of each method.
If you desire to use the Risk Study, a minimum of 3 years of financial data are required (5 years of data are recommended for best results).
Also, if you want all the available options choose Detailed Documentation and all the available methods and their required inputs will open.
They are for the subject company. The Analyzer uses the 8 alternative measures of size (or as many as are available for your subject company) for the Size Study, and the subject company accounting data entered for the Risk Study, to calculate COE for your subject company.
There are up to 8 alternative size measures that can be used with any of the four methods of estimating COE provided by the Duff & Phelps Risk Premium Report's "Size Study". It is important to note that it would not be unusual for fewer than 8 of these measures to be available for any given subject company. For example, Market Value of Equity will probably not be available for a closely-held company, nor will Market Value of Invested Capital (in which Market Value of Equity is embedded). In cases where fewer than 8 size measures are available, it is generally acceptable to use the size measures that are available.
You can enter whatever year you consider to be the "most recent year" relative to the valuation date.
As a book is required to be purchased to access the data, please refer to the methods in the book.
Choose the Analysis button at the bottom under step 3 Export. An Excel workbook will be downloaded to the user’s computer.