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More About This Title 2015 International Valuation Handbook — IndustryCost of Capital
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2015 International Valuation Handbook—Industry Cost of Capital is the essential reference for valuation professionals, providing country-level cost of equity capital estimates for more than 150 countries. Updated annually by the valuation experts at Duff & Phelps, this authoritative guide allows quick access to the data and adjustable capital models required to accurately determine company risk. Methodologies are systematically laid out in clear, concise language, and industry financial statistical calculations are explained in detail. Designed with a focus on practicality, this book provides extensive tables, charts, and definitions alongside real-world data exhibits from all major industries to become a one-stop reference for the estimation of international industry cost of capital.
The cost of capital is the expected rate of return for the purpose of attracting funds. The 2008 financial crisis exponentially increased the difficulty of estimation, and there is no 'one size fits all' solution. This book helps you plan and execute the ideal cost of capital estimation for your particular target, with extensive data and references provided.
- Get expert guidance on current methodologies and best practices
- Perform accurate calculations for a broad range of financial statistics
- Adjust for over 150 country- or region-specific risks
- Access data from agriculture, manufacturing, transportation, services, and more
Cost of capital estimation has long been considered one of the most critical elements in business valuation, capital budgeting, feasibility studies, and merger and acquisition decisions. Risk plays a major role, and every division, asset, and project deserves a custom-tailored approach. 2015 International Valuation Handbook—Industry Cost of Capital provides the globally-relevant, industry-specific, comparable numbers that make accurate estimation possible.
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Roger J. Grabowski, Managing Director of Duff &Phelps LLC, is a major speaker at conferences and has testified in court as an expert witness on the value of closely held businesses and business interests, matters of solvency, valuation and amortization of intangible assets and other valuation issues. Roger authors the annual Duff& Phelps' Risk Premium Report.
James P. Harrington, Director in the Office of Professional Practice at Duff & Phelps, is an accomplished financial writer and analyst. He provides technical support on client engagements involving cost of capital and business valuation matters, and leads efforts for development of Duff &Phelps' studies, surveys, online content and tools, and internal models.
Carla Nunes, Director in the Office of Professional Practice of Duff & Phelps LLC, provides firmwide technical guidance on a variety of valuation, financial and tax reporting issues. She has directed multiple valuation assignments for a wide range of industries, including pharmaceutical, biotechnology, healthcare, vitamin retail, specialty chemicals, industrial manufacturing, and gaming and hospitality.
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Acknowledgements ix
Introduction 1
Who Should Use the International Valuation Handbook – Industry Cost of Capital 2
Industry-Level Cost of Capital Estimates 3
Industry-Level Statistics, Capital Structure, Valuation Multiples, and Betas 3
Methodology 4
“Data Through” Date 4
Countries of Incorporation 4
Company Type 4
Currencies Used 4
Global Areas Covered 5
Industry Identification by GICS Code 8
Minimum Number of Companies Required 9
Data Sources 9
Derivation of Long-term Risk-free Rates and Long-term Equity Risk Premia 12
Company Screening Process 15
Identifying Initial Company Sets 16
Additional Company Screening 17
Medians and Industry Composites 22
“Latest” and “5-Year” Averages 24
Calculation of Industry Financial Statistics 30
GICS Code and Number of Companies in Main Set 30
Global Area and Currency 30
Graph – Relative 5 -year Performance 30
Three Largest and Three Smallest Companies by Sales and Total Assets 30
Annualized Monthly Performance Statistics 30
Number of Companies in the Median, the Composites, and the High-Financial-Risk Category 32
Return Ratios 33
Liquidity Ratio 37
Profitability Ratio 38
Graph – Operating Margin 38
Beta Overview 39
Levered Betas 40
Adjusted Betas 44
Graph – Betas (Levered) 46
Unlevered Betas 47
Leverage Ratios 48
Graph – Capital Structure, GICS Composite 52
Derivation of Long-term Growth Rates 52
Equity Valuation Multiples 53
Enterprise Valuation (E V) Multiples 57
Graph – Enterprise Valuation Multiples 62
Long-term Risk-free Rates and Long-term Equity Risk Premia 63
Cost of Capital Estimates 64
CAPM 65
Discounted Cash Flow (DCF) Models 67
1-Stage DCF 67
3-Stage DCF 68
Cost of Debt 71
Weighted Average Cost of Capital (WACC) 75
WACC Calculations 78
WACC – Graph 79
Appendix A
Definitions of Standard & Poor’s Global Vantage Database Data Items Used in Calculations
Industry Data Exhibits
World Company Set
Industry Data Exhibit 1: World Company Set, in € EUR
Industry Data Exhibit 2: World Company Set, in £ GBP
Industry Data Exhibit 3: World Company Set, in $ USD
European Company Set
Industry Data Exhibit 4: European Union, in € EUR
Industry Data Exhibit 5: European Union, in £ GBP
Industry Data Exhibit 6: European Union, in $ USD
Eurozone Company Set
Industry Data Exhibit 7: Eurozone, in € EUR
Industry Data Exhibit 8: Eurozone, in £ GBP
Industry Data Exhibit 9: Eurozone, in $ USD
United Kingdom Set
Industry Data Exhibit 10: United Kingdom, in € EUR
Industry Data Exhibit 11: United Kingdom, in £ GBP
Industry Data Exhibit 12: United Kingdom, in $ USD
