Company-Specific Risk: Incorporating and Assessing Cash Flow Assumptions

Roger J. Grabowski, FASA, has had an over 50-year career in valuation. 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) and has coauthored several books, contributed to other books, and authored and coauthored numerous papers. Mr. Grabowski is contributing author and headed the editorial team for The Lawyer’s Business Valuation Handbook 3rd ed. (American Bar Association, 2024). He has been serving on The Appraisal Foundation Working Group developing the advisory Valuation in Financial Reporting #5–The Company-Specific Risk Premium. He is the contributing author to The Art of Valuation: Reflections, Stories and Strategies from Business Appraisal (The Appraisal Institute, 2023); coauthor of the chapters “Case Study on Cost of Capital,” in Cases in Financial Management: Applications for Financial Analysis (World Scientific Publishing, 2023), and “Discounts Rates in Theory,” in Lost Profits Damages: Principles, Methods and Applications 2nd ed. (Valuation Products and Services, 2022); contributing author and co-editor of Shannon Pratt’s Valuing a Business—The Analysis and Appraisal of Closely Held Companies 6th ed. (McGraw-Hill, 2022); coauthor of Valuation Handbook-International Guide to Cost of Capital: 2021 Summary Edition (CFA Institute Research Foundation, 2021), coauthor with Shannon Pratt of The Lawyer’s Guide to Cost of Capital (American Bar Association, 2014), Cost of Capital: Applications and Examples 5th ed. (Wiley, 2014); Cost of Capital 4th ed.: Workbook and Technical Supplement (Wiley, 2011) and author of Closely Held Corporations: Valuations (Steven C. Dilley’s Federal Tax Workshops, 1983). Among the papers he authored are “Cost of Capital Estimation in the Current Distressed Environment” in The Journal of Applied Research in Accounting and Finance (July 2009) and “Comparing Growth Rates Used in Discounted Cash Flow Valuations” in Business Valuation Review (2021). Most recently he was a managing director with Kroll’s (formerly Duff & Phelps) Valuation Advisory Services practice. Previously he was managing director with Standard & Poor’s Corporate Value Consulting practice, a partner with PricewaterhouseCoopers LLP, and a partner with one of its predecessor firms, Price Waterhouse, where he founded its U.S. Valuation practice and managed the Real Estate Appraisal practice. Before that, he was one of the founders of the valuation firm, Valtec Associates, and started his valuation career with American Valuation Consultants. 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 and, in 2023, the ASA awarded him their Lifetime Achievement Award.