The Resource Pitfalls in applying the small company risk premium for tax and duty purposes

Pitfalls in applying the small company risk premium for tax and duty purposes

Label
Pitfalls in applying the small company risk premium for tax and duty purposes
Title
Pitfalls in applying the small company risk premium for tax and duty purposes
Creator
Subject
Language
eng
Summary
At the centre of many tax controversies are valuation issues. These cases typically involve either new valuation issues or require a re-evaluation of conventional, but not necessarily correct, approaches to existing valuation issues. In assessing the market value of the total assets of a "small" company using the discounted cash flow (DCF) valuation method, many practitioners routinely add a small company risk premium to the cost of equity derived using the capital asset pricing model to arrive at the discount rate adopted under the DCF valuation method. This article examines the potential pitfalls of this practice: failure to recognise the true subject of valuation, incorrect triangulation of empirical evidence from the US markets to the Australian market, and double-counting for risk. The article also explains why this common practice is problematic and why the recognition and avoidance of this unsound practice is important in achieving a credible valuation outcome for tax and duty purposes
Citation source
In: The tax specialist. - Sydney. - Vol. 19 (2016),
http://library.link/vocab/creatorName
Chu, H
Language note
English
http://library.link/vocab/subjectName
  • valuation
  • discounted cash flow method
  • risk
Label
Pitfalls in applying the small company risk premium for tax and duty purposes
Instantiates
Publication
Label
Pitfalls in applying the small company risk premium for tax and duty purposes
Publication

Library Locations

    • IBFD Library AmsterdamBorrow it
      Rietlandpark 301, Amsterdam, 1019 DW, NL
      52.37366609999999 4.9336932
Processing Feedback ...