Matching Risk and Return: Observations on Developing Discount Rates
- We will examine the considerations in measuring differences in financial risk; and
- We will examine research in adjusting for differences in business risk - how business risk changes due to factors such as size, profit margin, expected growth, customer diversification, business concentration, age of the business;
- We will walk through examples of adjustments for differences in business risk.
Closing Keynote, Friday, 1 December 2023 I 3:30 – 4:45 p.m.
Roger J. Grabowski, FASA
Kroll, Chicago I Managing Director, Valuation Advisory Services
Roger J. Grabowski, FASA, is a managing director in Kroll’s (formerly Duff & Phelps) Valuation Advisory Services practice. Previously, Mr. Grabowski was a managing director at Standard & Poor’s Corporate Value Consulting practice, a partner at PricewaterhouseCoopers LLP and at one of its predecessor firms where he founded its U.S. Valuation practice and managed the Real Estate Appraisal practice.
Mr. Grabowski has testified in court as an expert witness on various valuation matters. His testimony in the U.S. District Court was referenced in the U.S. Supreme Court’s landmark Newark Morning Ledger opinion (allowing amortization of customer-based intangible assets). His use of the discounted cash flow (DCF) method and the modified capital asset pricing model (MCAPM) for estimating the cost of capital for operating businesses was accepted by the U.S. Tax Court in the Northern Trust Company decision (the first time that the U.S. Tax Court accepted the DCF method and the MCAPM in valuing a closely held business).
Mr. Grabowski is co-developer of the annual Risk Premium Report – Size and Risk Studies for estimating cost of equity capital (available via the Kroll Cost of Capital Navigator).
He has authored and coauthored several books and numerous papers. He is the co-contributing author of “Case Study on Cost of Capital” in Cases in Financial Management; contributing author for The Appraisal Foundation’s The Art of Valuation: Reflections, Stories and Strategies from Business Appraisal; co-contributing author for Lost Profits Damages: Principles, Methods and Applications 2nd ed.; contributing author and co-editor of Shannon Pratt’s Valuing a Business – The Analysis and Appraisal of Closely Held Companies 6th ed.; co- author of Valuation Handbook-International Guide to Cost of Capital: 2021 Summary Edition, The Lawyer’s Guide to Cost of Capital, and Cost of Capital: Applications and Examples 5th ed.
Among papers he authored are “Cost of Capital Estimation in The Current Distressed Environment,” The Journal of Applied Research in Accounting and Finance, 4 (1) July 2009 and “Comparing Growth Rates Used in Discounted Cash Flow Valuations” (Business Valuation Review). He is former Editor of the ASA’s Business Valuation Review.
Mr. Grabowski is an Accredited Senior Appraiser, accredited in business valuation, and a Fellow of the ASA (FASA), its highest distinction.
In 2022, the ASA awarded Mr. Grabowski the Special Recognition Award in memory of Shannon Pratt for his work on Shannon Pratt’s Valuing a Business and, in 2023, the ASA awarded him their Life Achievement Award.