How can the calculations in the qualitative evaluation, specifically in the "Premium on Cost of Equity" (0.05 + 0.025 x (score -3) and for the trading multiples formula (-(0.3 + 015 x (score - 3) be explained in more detail?
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The calculations mentioned are simple linear equations that transform the risk score (3 on average) into a Cost of Equity premium and discount to trading multiples of listed peers.
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To explain using an example for the cost of equity calculation: We start with a 5% premium and add/subtract from that if there is a deviation from the average score of 3. The parameters themselves are best practice assumptions after speaking with many market participants (particularly in SME valuations), but yours might deviate from that.
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Our planned Product developments will allow the users to edit more aspects of the Qualitative Assessment and the CoE and Discount. (i.e. the 5% or the 30% intercepts, as well as the 2.5% and the 15% slopes) editable by the users. We also plan to allow changing the weights for each factor and adding or removing elements.
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