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Strategies & Market Trends : Professional Equity Analysis - the Pursuit of True Value

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To: cape radical who wrote (70)	2/13/1997 12:35:00 PM
From: Reginald Middleton	of 102

<i recently read a corporate finance journal and the author suggested that the risk premium has decreased. the author cites a premium of 2-3% and reasons that use of this premium makes today's high company valuations more reasonable. do you have any opinion on this or do you use the standard 6%?> I use 5.8%. I don't see where the risk premiumhas "went down." Corporate finance has become more sophisticated due to much more efficient risk management techniques, yet risks have increased signicantly with the globalization of the economic pool available to US corporations. Increasingly, more and more companies are having to deal with competition, regulations, and domicillary-realted business risks from more and more countries. The reason i have not been posting to the site is my polishing of the beta models that I am preparing. Later today, I am going to put them to a real world test. The people over at the NOVL thread are trying to start a proxy fight with the NOVL board; and it seems as if they have the backing of CALPER's (the country's largest pension fund which holds 1.7 million shares of NOVL). I will post on my site within a few hours a full economic valuation of NOVL, along with DCF/EVA quasi-leveraged buyout scenario. I will email a copy to the NOVL mgmt., CALPER's, the Internet related media, and the mgmts of competitive, valuable technology companies whom I feel may be interested. This is the first in a series many economic evaluations and buyout scenarios I will conduct in an effort to increase the shareholder value of the laggard stocks that I come across. Next will probably be Consolidated Edison. Feel free to download the traditional model at rcmfinancial.com and run an accounting earnings valuation for yoursevles. I will post a notice when the NOVL valuation is ready. Please provide as much feedback as possible, and if you currently hold NOVL shares, let us see if the Internet is powerful enough to increase shareholder value through efficient knowledge dissemination.

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