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Category Archives: Valuation Basics

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Valuation Basics: Comparable Companies Analysis

Posted in Comparable Companies, Fair Value, Valuation Basics, Valuation Expert

Our “Valuation Basics” series has focused on the various components of a discounted cash flow analysis under the income approach, which seeks to value a company based on the present value of its projected cash flows.  This post and those to follow in this series will now move away from the income approach and instead… Continue Reading

Valuation Basics: Equity Risk Premium and Beta

Posted in Beta, Discounted Cash Flow Analysis, Equity Risk Premium, Fair Value, Valuation Basics, Valuation Expert, WACC

Prior posts in our “Valuation Basics” series have examined the various components of the cost of equity capital under the Capital Asset Pricing Model (“CAPM”). In this post we continue our discussion of those components, focusing on the equity risk premium and its modifying coefficient, the beta. The CAPM has become the Delaware Court of… Continue Reading

Valuation Basics: Calculating the Equity Size Premium

Posted in Discounted Cash Flow Analysis, Fair Value, Size Premium, Valuation Basics, Valuation Expert, WACC

In a prior post, we explained how the Capital Asset Pricing Model (“CAPM”) has become one of the frequently employed methods used by the Delaware Court of Chancery to calculate the cost of equity for the discount rate in a DCF analysis. In this post, we focus on one specific component of the CAPM: the… Continue Reading

Valuation Basics: Calculating Terminal Value Using the Gordon Growth Model

Posted in Discounted Cash Flow Analysis, Fair Value, Terminal Value, Valuation Basics, Valuation Expert

In a prior post we mentioned the three basic components of a discounted cash flow (“DCF”) valuation analysis — cash flow projections, a discount rate, and a terminal value — and explained how to calculate one of those components, the discount rate. In this post, we tackle another component, the terminal value. In a typical… Continue Reading

Valuation Basics: Determining a Discount Rate, or WACC

Posted in Discounted Cash Flow Analysis, Fair Value, Valuation Basics, Valuation Expert, WACC

The discounted cash flow method, or “DCF”, has become the generally accepted method of valuation in Delaware’s Court of Chancery.  The DCF method seeks to value a company by discounting the company’s projected future cash flows to present value based on the perceived risk of investing capital in that company.  As recently summarized by Vice… Continue Reading