Cost Of Capital Basics

Dr. Shannon P. Pratt is a founder and a managing director of Willamette Management As­sociates. Founded in 1969, Willamette is one of the oldest and largest independent valuation consulting, economic analysis, and financial advisory services firms, with offices in principal cities across the United States- He is also a member of the board of directors of Paulson Capital Corp., an investment banking firm (see also about invest money).

Over the last 35 years. Dr. Pratt has performed valuation engagements for mergers and ac­quisitions, employee stock ownership plans (BSOPs), fairness opinions, gift and estate taxes, in­centive stock options, buy-sell agreements, corporate and partnership dissolutions, dissenting stockholder actions, damages, marital dissolutions, and many other business valuation purposes. He has testified in a wide variety of federal and state courts across the country and frequently participates in arbitration and mediation proceedings.

He holds an undergraduate degree in business administration from the University of Wash­ington and a doctorate in business administration, majoring in finance, from Indiana University. He is a Fellow of the American Society of Appraisers, a Master Certified Business Appraiser, a Chartered Financial Analyst, a Certified Business Counselor, and a Certified Mergers and Ac­quisitions Advisor.

Dr. Pratt's professional recognitions include being designated a life member of the Business Valuation Committee of the American Society of Appraisers, past chairman and a life member of the HSOP Association Advisory Committee on Valuation, a life member of the Institute of Business Appraisers, the recipient of the magna cum laude in business appraisal award from the National Association of Certified Valuation Analysts, and the recipient of the Distinguished Achievement Award from the Portland Society of Financial Analysts. He served two three-year terms (the maximum) as a trustee-at-large of The Appraisal Foundation.

Dr. Pratt is author of Business Valuation Discounts and Premiums, Business Valuation Body of Knowledge, Cost of Capital: Estimation and Applications, "2nd edition, and The Market Approach to Valuing Businesses (all published by John Wiley & Sons, Inc.), and The Lawyer's Business Valuation Handbook (published by the American Bar Association), He is coauthor of Valuing a Business: The Analysis and Appraisal of Closely Held Companies, 4th edition, and Valuing Small Businesses and Professional Practices, 3rd edition (both published by McGraw-Hill), lie is also coauthor of Guide, to Business Valuations, 12th edition (published by Practi­tioners Publishing Company).

He is the editor-in-chief of the monthly newsletter Shannon Pratt's Business Valuation Up­date13, He oversees BVLtbrary.conf™, which includes full texts of court cases, conference pre­sentations and unpublished papers, IRS materials, restricted stock study papers, and pre-IPO study papers and data. He also oversees Pratt's Stats'™, which is the official completed transaction database of the International Business Brokers Association, and BVMarketData,cotrf!a, which includes the online version of Pratt's Stals™, as wrell as B1ZCOMPS®, Merger slat/Shannon Pratt's Control Premium Study™, The FMV Restricted Stock Study™, and the Valuation Advi­sors's Lack of Marketability Discount Study™.

Dr. Pratt, develops and teaches business valuation courses for the American Society of Ap­praisers and Ihe American Institute of Certified Public Accountants, and frequently speaks on business valuation at national legal, professional, and trade association meetings. He has also developed a seminar on business valuation forjudges and lawyers.

About the Authors

Alma V. Ntcultla is the managing editor of Shannon Pratt's Business Valuation Update®. She earned her bachelor of economics in banking and finance from the Academy of Econom­ics Studies in Bucharest, Romania, her masters in business administration from CMC Graduate School of Business in the Czech Republic, and her masters of business administration in finance from me Joseph M. Katz Graduate School of Business at the University of Pittsburgh. She is also enrolled in the departmental doctor of philosophy program in systems science/business ad­ministration at Portland State University.

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