Selection of Capitalization Rules For Valuing a Closely Held Business

Valuation of Closely‐held Firms: A Survey

“…In the valuation process certain factorslvariables must be accessible or data for a proxy must be available. Most approaches require a capitalization or discount rate, which can be determined in various ways (see Brigham and Gapenski (BG), 1982;Weston and Copeland (WC), 1986;McCarthy and Healy, 1971;Revenue Ruling 59-60, 1986;Pratt, 1986;Plutchock, 1985;and Schilt, 1982). I n some valuation techniques determining the capitalization/discount rate involves a model such as the capital asset pricing model (CAPM) (Garbade, 1982;and Williams, 1938) for an adaptation of the CAPM, which Mercer (1989) calls the Adjusted CAPM.…”

“…In valuation techniques requiring a bond yield, BG ( 1990), and WC ( 1986), the yield on bonds of comparable firms is normally used as a proxy. However, a bond yield plus a risk premium can be determined or proxied in different ways as suggested by BG (1990), WC (1986), Pratt (1986), and Schilt ( 1982). Other valuation techniques proxy the beta and price-earnings ratios by what some analysts call the comparable-firm method such as presented by McCarthy andHealy (1971), Revenue Ruling 59-60 (1959), and Revenue Ruling 68-609 (1968).…”

Economic–Financial Assessment of Seawater Desalination Plants in Northern Chile to Reduce Hydric Scarcity and a Proposal for the Environmental and Sustainable Use of Brine Waste by Cultivating the Microalga Dunaliella salina to Produce β-Carotene

“…CAPM = R = Rf + (Rm − Rf) * Beta Replacing the data in the equation 18.25% = 4.7% + (16.38 − 4.7%) × 1.16 (4) Once the cost of equity is obtained, we proceed to find the US risk premium according to the life stage and the size of risk capital (see Table 13) [56,[98][99][100].…”