The research and data preparation for deriving the cost of capital does not have to be a tedious process.
KPMG Valuation Data Source aggregates all key cost of capital parameters - including beta factor and credit spread. In just a few steps, the solution guides the user through the derivation of the individual weighted average cost of capital (WACC) or the cost of equity relevant for the financial sector: the user simply specifies the preferred reporting date, the desired country, the currency, and the peer group and selects the desired settings. To identify suitable peer companies, the user can resort to precise search functions, e.g. filter options by industry, region or profitability (e.g. margins or growth). To guarantee full flexibility in setting parameters and calculations, users can access the data calculated by KPMG at any time or incorporate their own values into the cost of capital derivation. To further accelerate the input process, sector betas can be accessed for an initial indication. Since queries are saved automatically once they have been created, the calculation of the current cost of capital only requires the selection of the desired reporting date after the initial entry. The results can be downloaded into an Excel-sheet or pdf-file and forwarded to the auditor together with the documentation.
The tool provides access to cost of capital parameters from more than 150 countries and peer group-specific data from over 16,500 companies worldwide. The cut-off dates range from 2011 to the present. The interactive dashboard is updated monthly and can be accessed anywhere and anytime.
Direct WACC calculation and access to all relevant cost of capital parameters
Reliability and monthly updates of data ensured by KPMG experts
Option of selecting the cash flow currency
Summary and storage option of own peer group from more than 16,500 companies worldwide
Parameters available as Excel spreadsheet for download
In addition to access to the tool, we provide you with a personal advisor as your direct contact, who will conduct the cost of capital derivation for you according to your specifications. You also receive an executive summary.
Besides access to the tool and a personal contact, we provide you with individual parameter derivations, background research and statistical assessment of the data.
The typified, uniform risk-free rates are derived from yield curves based on regression parameters and results published by central banks (e.g., Deutsche Bundesbank, Bank of England, Federal Reserve). The inflation differential is calculated by us, based on inflation estimates provided by Economist Intelligence Unit. For the market and country risk premium, we conduct our own analyses and calculations. Exchange rates are collected from the Federal Reserve (USD) and European Central Bank (Euro). Corporate income tax rates are based on the KPMG tax survey. Credit spreads are estimated based on a company’s individual rating on a given date. The App includes documentation for all of these sources.
With the KPMG Valuation Data Source, you can calculate both types of WACC. The Free Cash Flow WACC is composed of the weighted return expectations of all the investors (equity and debt investors) and the “tax correction term” (tax shield). In contrast, the Total Cash Flow WACC does not account for the tax shield. In this case, the cash flow is formulated as dependent on the capital structure and the tax advantage from the debt is considered in the total cash flow instead of in the cost of capital (WACC).
The type of beta appropriate for the derivation of your individual costs of capital depends on the characteristics of your company. The KPMG Valuation Data Source’s unlevered betas rely on conceptual frameworks which need to be chosen by the user (raw vs. adjusted levered beta, certain vs. uncertain tax shields, application or non-application of debt-beta, different regression periods). The KPMG Valuation Data Source does not select the appropriate settings for you, but provides extensive documentation about the different beta types which will facilitate your decision.