The Duff & Phelps Cost of Capital Navigator is an online application that guides the analyst through the process of estimating cost of capital, a key component of any valuation analysis.
When Duff & Phelps launched the Cost of Capital Navigator platform in early 2018, it included the U.S. size premia, industry risk premia, equity risk premia, risk-free rates, and other essential valuation data previously published in the Duff & Phelps Valuation Handbook – U.S. Guide to Cost of Capital from 2014 to 2017, and prior to that published in the Ibbotson Associates/Morningstar Stocks, Bonds, Bills, and Inflation® (SBBI®) Valuation Yearbook and the Duff & Phelps Risk Premium Report.1
In early 2019, Duff & Phelps is adding five new features to the Cost of Capital Navigator that will provide significant benefits to users of the platform in the form of additional data, information and enhanced functionality. These new features are free to all Cost of Capital Navigator subscribers.
New Features Added in Early 2019
Size Premia and Breakpoint Tables Are Now Viewable: Cost of Capital Navigator subscribers indicated to us that being able to see the full CRSP Deciles Size Study and Risk Premium Report size premium tables and risk premium tables, along with the "breakpoints" (i.e., upper and lower bounds) of the deciles and portfolios in these tables, would better assist them when selecting the appropriate size premium or risk premium for their subject company. Starting in 2019 these tables are:
- Viewable within the Cost of Capital Navigator in the same screen (step) where the user selects the size premium or risk premium that is most appropriate for their subject company.
- Included in the Navigator's PDF outputs for support and audit review purposes.
The Cost of Capital Navigator includes the size premia and risk premia data for both of these critical valuation data sets back to 1999, and will present the user with the appropriate year's tables based upon the valuation date the user selected.
Excel Add-in: This powerful new tool enables Cost of Capital Navigator users to directly import Duff & Phelps cost of capital data (size premia, equity risk premia, risk free rates, betas, industry risk premia and more) into their own Excel spreadsheets.
Industry Snapshot: The Cost of Capital Navigator Resources section will include a new "Industry Snapshot" which provides key industry-level data (e.g., industry-level cost of equity capital estimates, betas, valuation multiples, etc.) from the Valuation Handbook – U.S. Industry Cost of Capital, as of the user's valuation date for the industry in which the subject company operates. This important contextual data can help financial professionals benchmark, augment, and support their own custom analysis of the subject company and its industry.
WACC Estimate: Starting in 2019, users can incorporate their cost of equity capital estimates into a weighted average cost of capital (WACC) computation.
Enhanced Outputs: In 2019, "Enhanced Outputs" provide robust and comprehensive documentation of the user's cost of capital assumptions, sources, analysis, and results. The enhanced reports will be available as an export to PDF and Excel.
What's Coming Next?
The Duff & Phelps Cost of Capital Navigator currently includes two essential valuation data sets (the CRSP Deciles Size Premia Study and Risk Premium Report Study) used by financial professionals to develop U.S.-based cost of capital estimates.
Later in 2019 and 2020, Duff & Phelps will add data sets to the Cost of Capital Navigator that include comprehensive U.S. and international industry statistics for hundreds of global industries, international valuation data that includes historical equity risk premia for sixteen different countries, and country risk premia (based upon the sovereign yield spread model and the country credit rating model) for over 180 countries.
1. Prior years' CRSP Decile Size Study and Risk Premium Report Study valuation data available in the online Cost of Capital Navigator is "as published". This means that this data appears just as it was published in the Duff & Phelps Valuation Handbook – U.S. Guide to Cost of Capital (2014–2017), the Ibbotson Associates/Morningstar Stocks, Bonds, Bills, and Inflation® (SBBI®) Valuation Yearbook (1999–2013), and the Duff & Phelps Risk Premium Report (1999–2013). Used with permission. The data in the Cost of Capital Navigator is updated regularly.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.