The estimate of a long-term sustainable growth rate for a business enterprise is a key input for valuation estimates using the Income Approach. Research on long-term growth rate estimates disclosed in SEC filings suggests a wide range of growth estimates have been used by appraisers. And what is the relationship between the long-term sustainable growth rate to the growth rates often provided by security analysts? What are the differences in underlying assumptions? Economists have also raised questions regarding the sustainability of long-term growth rates. Does the risk of the cash flows change over time and how can this changing risk be reflected in the discount rate? Roger J. Grabowski, FASA, will explore this important valuation input.
Mr. Grabowski is a Managing Director with Duff & Phelps LLC and an Accredited Senior Appraiser and Fellow (FASA) of the American Society of Appraisers (ASA) (their highest designation), Business Valuation. He is co-author with Shannon Pratt of Cost of Capital: Applications and Examples, 5th ed. (John Wiley & Sons, 2014), The Lawyer’s Guide to Cost of Capital (ABA, 2014), and Cost of Capital in Litigation: Applications and Examples (John Wiley & Sons, 2010). He is co-author of the Duff & Phelps annual resources for cost of capital data: Valuation Handbook-Guide to Cost of Capital, Valuation Handbook-Industry Cost of Capital, International Valuation Handbook – Guide to Cost of Capital and International Valuation Handbook – Industry Cost of Capital (John Wiley & Sons).