The Butler Pinkerton Calculator: An Update - BVMarketData

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Learning Objectives: • Problems with traditional factor models: Use at own peril! • The Choice: Empirical Data v. No data – The choice is yours: • Make it wisely • Impeach inferior cost of capital estimates • Secondary Choices: Empowerment/Transparency • Other Applications for the Calculator Determination of the proper capitalization rate presents one of the most difficult problems in valuation – RR 59-60 2
Let’s Get Some Things Out of the Way First • You can do all of these calculations yourself. – You do not need the BPC! • Total Beta and the BPC violate the CAPM! – So does every single privately-held company! – The size premium violates the CAPM. – The CSRP violates the CAPM. – Total Beta and the BPC do not, however, violate financial theory for individual assets. • Total Beta assumes a completely undiversified investor (or pool of completely undiversified investors) – Good assumption? It depends on the assignment – Regardless, it is still a data point that is better than guessing • Not asking you to abandon other cost of capital models, BUT: 3
Page 1: The Butler Pinkerton Calculator: An
Page 5 and 6: Traditional Factor Models: Use at O
Page 7 and 8: The Courts Want Empirical Data! •
Page 9: The Solution: Total Beta and the BP
Page 13 and 14: More Transparency 13
Page 15 and 16: Impeach Inferior Estimates of Cost
Page 17 and 18: Interesting Observation: “I Don
Page 19 and 20: Other BPC Applications: • First,
Page 21 and 22: Other BPC Applications (continued):
Page 23 and 24: Total Beta:BPC and Peer Review 1) R
Page 25 and 26: Another Select Testimonial • We b
Page 27 and 28: Questions to Consider: • If Total
Page 29 and 30: The Butler Pinkerton Calculator: An
Page 31 and 32: Are You on the Left-side or the “
Page 33 and 34: Other Observations: Instability of
Page 35 and 36: Response to Roger Grabowski’s Sli
Page 37: Summary: • All models are wrong,

The Butler Pinkerton Calculator: An Update - BVMarketData

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