Corporate Finance Partner

Dear Madam/Sir ....,

You receive this message because you are interested in company valuation. You bought F-Valuation Software or downloaded a demo version in the past. Herewith the latest news on the risk premium 2013.

Latest Risk Premium 2013 now available.
The 2012 upswing in USA stock markets combined with a larger upswing in returns on US government treasuries, resulted as to 2013 in a lower risk premium of 3,80% for the USA. As to 2012, the risk premium was still 4,68% and 2011 stood at 4.98%. Both calculations are based on the maximum number of years since 1900 and using as method the unweighted average of all methods of calculation. Risk premiums for Europe may be found with the various contries at this website under news etc. For now comparative data from other sources are not yet available.

The 'risk free' US rate is also down to 1,80% end 2012, from 2.78% at the end of 2011 and 3.26% end 2010. In total this gives actually about 5.6% remuneration for the equity component in company and other valuations. Supposing other sources of business financing are available at the same price level (before tax), the impact of financial leverage may be disregarded.

In these circumstances, a WACC of around 5.6% is the result, or conversely, a theoretical Price/Earnings relation of about 17,86. In the USA the unweighted Dow Jones index at March 4 2013 gave a PE ratio of 13.1 based on 2013 net earnings estimates. This difference between theoretical and practical PE of 4.76 (17,86-13.1) has a meaning. Under some assumptions, (strategic) investors, pension and investment funds should theoretically buy shares now. Two points are relevant then on a tactical level: share selection and buying moments.
•As to share selection, keep in mind that the actual difference between theoretical and practical PE on most European markets is much higher. In Germany and in the UK for example, the difference is well over 10.
•As to buying moments, budgetary conflicts in the USA could well spoil the party in the coming months. The euro crisis appears temporarily under control. China could well slide its banking problems under the table for the time being.

A free demo can be downloaded from this website by clicking on the link: Free Software. The latest version 8 with the latest risk premiums can be purchased online with the link: Order Software.

Best Regards,

Finiconsult Ltd
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