Acknowledgements xiii
Introduction 1
Who Should Use the Valuation Handbook – International Industry Cost of Capital 2
Industry-level Cost of Capital Estimates 3
Industry-level Statistics, Capital Structure, Valuation Multiples, and Betas 4
New in the 2017 Valuation Handbook – International Industry Cost of Capital 4
Methodology 5
“Data Through” Date 5
Countries of Incorporation 5
Company Type 5
Currencies Used 5
Global Areas Covered 6
Industry Identification by GICS Code 9
Minimum Number of Companies Required 10
Data Sources 10
Derivation of Long-term Risk-free Rates and Long-term Equity Risk Premia 13
Company Screening Process 16
Identifying Initial Company Sets 17
Additional Company Screening 18
Medians and Industry Composites 23
“Latest” and “5-Year” Averages 26
Calculation of Industry Financial Statistics 31
GICS Code and Number of Companies in the Main Set 31
Global Area and Currency 31
Graph – Relative 5-Year Performance 31
Three Largest and Three Smallest Companies by Sales and Total Assets 31
Annualized Monthly Performance Statistics 31
Number of Companies in the Median, the Composites, and the High-Financial-Risk Category 33
Return Ratios 34
Liquidity Ratio 38
Profitability Ratio 39
Graph – Operating Margin 39
Beta Overview 40
Levered Betas 41
Adjusted Betas 45
Graph – Betas (Levered ) 47
Unlevered Betas 48
Leverage Ratios 49
Graph – Capital Structure, GICS Composite 53
Derivation of Long-term Growth Rates 53
Equity Valuation Multiples 54
Enterprise Valuation (EV) Multiples 61
Graph – Enterprise Valuation Multiples 66
Long-term Risk-free Rates and Long-term Equity Risk Premia 66
Cost of Capital Estimates 68
CAPM 68
Discounted Cash Flow (DCF) Models 70
1-Stage DCF 70
3-Stage DCF 72
Cost of Debt 75
Weighted Average Cost of Capital (WACC) 78
WACC Calculations 82
WACC – Graph 83
Appendix A
Definitions of Standard & Poor’s Global Vantage Database Data Items Used in Calculations
Industry Data Exhibits
World Company Set
Industry Data Exhibit 1: World Company Set, in € EUR
Industry Data Exhibit 2: World Company Set, in £ GBP
Industry Data Exhibit 3: World Company Set, in $ USD
European Company Set
Industry Data Exhibit 4: European Union, in € EUR
Industry Data Exhibit 5: European Union, in £ GBP
Industry Data Exhibit 6: European Union, in $ USD
Eurozone Company Set
Industry Data Exhibit 7: Eurozone, in € EUR
Industry Data Exhibit 8: Eurozone, in £ GBP
Industry Data Exhibit 9: Eurozone, in $ USD
United Kingdom Company Set
Industry Data Exhibit 10: United Kingdom, in € EUR
Industry Data Exhibit 11: United Kingdom, in £ GBP
Industry Data Exhibit 12: United Kingdom, in $ USD
