Analysis and evaluation of the approach to the cost of capital and capital structure in the Czech expert opinions on the business valuation - Part 1

Analýza a zhodnocení přístupu k nákladům kapitálu a kapitálové struktuře v českých znaleckých posudcích na ocenění podniku - 1. část

Pavla Maříková and Milan Dlabaja

Oceňování, 2021, vol. 14, issue 2, 3-27

Abstract: The aim of the article is to map the situation of Czech expert practice on a sample of published expert opinions, namely the methods used to determine the capital structure for a discount rate, the projection of indebtedness into the cost of equity and methods used for estimating of the cost of equity and their main components. The analysis included 105 expert opinions with the income valuation of the company, of which 81 included the valuation of the indebted company.The main findings of the analysis: the positive fact is that 54% of expert opinions use a tuned capital structure through iterations for each year, but 19% of opinions work with the target structure, which means inconsistency in valuation. The worse situation is in the use of reagental functions to recalculate the cost of equity. Although the cost of equity is recalculated according to the amount of indebtedness, 78% of expert opinions use the least suitable function for the conversion of beta, and only 15% of expert opinions use a more appropriate function. On the positive side, more than a quarter of the expert opinions included an ex-ante estimate of the capital market risk premium. However, for all the examined criteria, there were always several expert opinions containing more significant shortcomings.

Keywords: value; business valuation; capital cost; capital structure; regental function; discount rate; iterations; hodnota; ocenění podniku; náklady kapitálu; kapitálová struktura; reagenční funkce; diskontní míra; iterace (search for similar items in EconPapers)
JEL-codes: G32 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.18267/j.ocenovani.260

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