Valuation Implications of the Tax Cuts and Jobs Act of 2017

Focus on Privately Owned C Corporations


The Tax Cuts and Jobs Act of 2017 was signed into law by President Trump on December 22, 2017. President Trump calls the bill the biggest tax cut in American history, and there were substantial reductions in both corporate and personal income tax rates. The tax reduction act will impact C corporations as well as pass-through entities. This post focuses only on C corporations and looks at the marginal impact of the change.

Dividend Policy Is Part of Corporate Finance for Private Companies


Business owners are faced with three universal questions as they run their businesses. These questions are addressed by every business every year, one way or the other, directly or indirectly, consciously or unconsciously. This post addresses these three questions.

Business Appraisal Review: A Helpful Tool in Litigation and Otherwise


Over the years, I have been called upon to review the work of other appraisers and damages experts.  To a certain extent, the requirements for appraisal review come with the territory of being an expert witness.  Appraisers for a side in litigation are often asked to review the work of the opposing expert.  In the […]

Should Business Appraisers “Normalize” Long-Term Treasury Rates When Building Equity Discount Rates?


The idea of normalizing Treasury yields when building up equity discount rates has been around for about a decade. I do not believe that “normalizing” Treasury rates when building up discount rates is a procedure that should be used by business appraisers. This post provides the rationale for this position.

What Determines the Level of Value in Business Valuation?

Expected Cash Flow, Risk and Growth


In the last post, we talked about the traditional levels of value chart; however, by the mid to latter 1990s, many business appraisers began to realize that there were problems with using control premium data (used to “move” from the marketable minority level to the controlling interest level) to estimate minority interest discounts. The main issue was that most transactions involving the change of control of public companies, from which this data was developed, involved strategic control or synergistic acquisitions. The thinking led to the development of a new levels of value chart.

The Traditional Levels of Value Chart

There's More to the Story


Business appraisers have dealt with concepts related to the levels of value for many years. These levels of value are conceptual in nature and relate to where, on a continuum of value, a particular valuation interest should lie. Does the interest exhibit elements of control? The appropriate level of value should reflect this. Is there no control for a minority interest? The appropriate level of value should reflect this, as well. What about if there is no available market for the interest? The appropriate level of value should reflect this, also. It seems so simple and basic.