Webcast: Valuation Impacts of U.S. Tax Reform. February 21, 2018

Transcription

1 Webcast: Valuation Impacts of U.S. Tax Reform February 21, 2018

2 Duff & Phelps Dedicated to Delivering Value 2

3 More Than 70 Offices and Affiliates Worldwide 3

4 Enhancing Value Across a Range of Expertise 4

5 Today s Presenters Nate Levin Roger Grabowski Carla Nunes Michelle Johnson 5

6 Agenda Background on 2017 U.S. Tax Cuts and Jobs Act Impact on Cash Flow Projections and DCF Analyses Cost of Capital Implications Pass-Through Entities International Provisions 6

7 U.S. Tax Cuts & Jobs Act Background and Overview

8 Background on the 2017 U.S. Tax Cuts and Jobs Act The 2017 Tax Cuts and Jobs Act (the 2017 Act ) became effective on December 22, The provisions of the 2017 Act impact not only U.S. companies and their foreign operations, but also non-u.s. companies conducting business in the United States. Duff & Phelps February 21,

9 2 Impact on Cash Flow Projections Discounted Cash Flow Analyses

10 Corporate Tax Rate Corporate tax rate is permanently reduced to a flat 21% for tax years beginning after Dec. 31, The rate reduction will be offset, to some degree, by the repeal of certain special tax credits and deductions, which will vary among companies and industries. Permanent change: Must be considered in both discrete period cash flows and the terminal year calculation Impact from non-u.s. operations/assets given interplay with international tax provisions State and Local Taxes: Corporations will still be allowed deduction. Cost of Capital: Impact on the estimation of a firm s WACC 10

11 Temporary 100% Expensing for Certain Business Assets Applicable Percentage* 100% 80% 60% 40% 20% AP Longer Production Period* 100% 80% 60% 40% 20% * Also applies to used property (Property that was not used by the taxpayer any time prior to the acquisition) Capital expenditures of qualified property placed in service: o On or prior to Sept. 27, 2017: depreciated under prior law o After Sept. 27, 2017 through Dec. 31, 2022: 100% bonus depreciation o After Dec. 31, 2022: portion not qualified for bonus depreciation (not immediately expensed) reverts back to prior law Requires extended DCF projections and detailed modeling of tax depreciation runoff Evaluate state income tax regulations to assess conformity with the 2017 Act Expect that buyers will more heavily favor deals structured as asset transactions 11

12 Research & Experimental (R&E) Expenditures Projections that extend beyond 2022 must reflect this change. In addition, the long-term relationship between capitalized R&E expenditures and their amortization must be evaluated and reflected in the normalized residual cash flow estimate used for the terminal value estimate. R&E Ability to expense R&E, including software development, will end December 31, 2021 U.S. 2022: Begin Capitalizing and Amortizing over a 5-year period Outside U.S. 2022: Begin Capitalizing and Amortizing over a 15-year period 12

13 DCF Operating Projections Typically prepared on an accrual basis according to U.S. GAAP or IFRS Operating cash taxes (taxes deducted from EBIT) in an enterprise level DCF should be separately calculated based on the 2017 Act provisions The following represents a typical set of projections prepared according to U.S. GAAP: Revenue 5,000 5,150 5,305 5,464 5,628 5,797 5,971 6,150 6,335 6,525 Gross Profit 3,750 3,862 3,979 4,098 4,221 4,348 4,478 4,612 4,751 4,894 Operating Expenses: SG&A Research & Experimentation Other OpEx Total OpEx 1,150 1,185 1,220 1,256 1,294 1,333 1,372 1,414 1,456 1,500 EBITDA (accrual based) 2,600 2,677 2,759 2,842 2,927 3,015 3,106 3,198 3,295 3,394 Depreciation (book) ,013 1,044 1,076 1,108 1,141 1,175 EBIT 1,700 1,750 1,804 1,858 1,914 1,971 2,031 2,090 2,154 2,219 13

14 Operating Cash Taxes Calculation Same accrual basis as shown on the prior slide R&E is converted to amortization in 2022 Temporary 100% expensing of qualifying property (20-years or less) until 2023, then declining through 2026 A 25% blended rate is applied to the Adjusted EBIT to derive operating cash taxes used in the DCF EBITDA (accrual based) 2,600 2,677 2,759 2,842 2,927 3,015 3,106 3,198 3,295 3,394 R&E Expenditure Adjustment Adjusted EBITDA (tax based) 2,600 2,677 2,759 2,842 3,489 3,594 3,702 3,812 3,927 4,045 Tax Depreciation: Existing Tax Basis Run-off Expensed (Bonus Depreciation) Capital Expenditures Total Tax Depreciation 1,703 1,632 1,562 1,493 1,425 1,198 1, Adjusted EBITA 897 1,045 1,197 1,349 2,064 2,396 2,697 3,078 3,348 3,509 R&E Expenditure Amortization Adjusted EBIT 897 1,045 1,197 1,349 2,017 2,254 2,457 2,737 2,903 3,000 Operating Cash Taxes 25%

15 Operating Cash Taxes Some Highlights R&E is shown as a book expense but amortized beginning in 2022 to calculate cash taxes. Depreciation is a blend of bonus depreciation, runoff of existing tax basis and 39-year property begins a period of higher effective cash taxes as bonus depreciation fades, while R&E amortization begins in Revenue 5,000 5,150 5,305 5,464 5,628 5,797 5,971 6,150 6,335 6,525 Gross Profit 3,750 3,862 3,979 4,098 4,221 4,348 4,478 4,612 4,751 4,894 Operating Expenses: SG&A Research & Experimentation Other OpEx Total OpEx 1,150 1,185 1,220 1,256 1,294 1,333 1,372 1,414 1,456 1,500 EBITDA (accrual based) 2,600 2,677 2,759 2,842 2,927 3,015 3,106 3,198 3,295 3,394 Depreciation (book) ,013 1,044 1,076 1,108 1,141 1,175 EBIT 1,700 1,750 1,804 1,858 1,914 1,971 2,031 2,090 2,154 2,219 Operating Cash Taxes Effective Cash Tax Rate 13% 15% 17% 18% 26% 29% 30% 33% 34% 34% 15

16 Net Operating Loss (NOL) Deductions NOL Deductions NOLs arising prior to 12/31/17 Old law NOLs arising after to 12/31/ Act Pre 12/31/17 NOLs: Still eligible for two-year carryback and 20-year carry forward treatment; Not subject to an income limitation. Post 12/31/17 NOLs: Limited to 80% of taxable income; Carried forward indefinitely; Carrybacks generally prohibited. Interest expense limitation impacts the NOL computation Valuation Impact: Bifurcate amounts expected to be used under prior and new laws into separate buckets No change to Section 382 limitation 16

17 Timing of Certain Provisions of the 2017 Act Qualified Property Bonus Depreciation (BD) Percentage* BD Percentage Longer Production Period* % 80% 60% 40% 20% 100% 80% 60% 40% 20% Research & Experimental Expensed 5-Year Amortization (U.S.) 15-Year Amortization (Non-U.S.) Interest Limitation 30% EBITDA 30% EBIT NOL Deductions NOLs arising prior to 12/31/17 Old law NOLs arising after to 12/31/ Act * Also applies to used property (Property that was not used by the taxpayer any time prior to the acquisition) 17

18 Prospective Financial Information (PFI) Assumptions and Inputs Expected impact of tax savings: Incremental Cash Flow from Operations should not by default automatically translate to increased Free Cash Flow, as operating cash may be deployed in the following ways: Special dividends and/or share buybacks Employee compensation Capital investments Change in mix of domestic vs. foreign investment Accelerated R&D prior to amortization Debt repayment due to interest limitations Strengthen linkages between tax and corporate finance / business development teams in order to properly capture impacts of 2017 Act in strategic plans, deal models, impairment analyses, etc. 18

19 3 Cost of Capital Implications

20 WACC or Overall Cost of Capital Defined Income Tax Rate Cost of Debt Cost of Common Equity WACC = W d ( 1 t ) k d + W e k e W e Debt / Total Capital Common Equity / Total Capital Note: + = 100% W d W e 20

21 New Tax Reform Provisions with An Impact on Cost of Capital DIRECT Impact Lower Corporate Tax rate = 21% for U.S. Source Income [from 35%] After-Tax Cost of Debt (k d ) Cost of Equity(k e ) (depending on Beta formula) Interest Expense Deductibility Limitations After-Tax Cost of Debt (k d ) Capital Structure Weights? 21

22 New Tax Reform Provisions with An Impact on Cost of Capital INDIRECT / UNKNOW Future Impact Lower Corporate Tax rate = 21% for U.S. Source Income [from 35%] Risk-Free Rate Will interest rates rise (e.g. to finance a potentially higher U.S. budget deficit)? Equity Risk Premium (ERP) Historically, lowering U.S. corporate tax rates, increased P/E multiples, lowering ERP Conversely, could uncertainty around impact of tax reform on U.S. economy increase ERP? Pre-Tax Cost of Debt If the risk-free rate rises, the pre-tax cost of debt is likely to rise as well Interest Expense Deductibility Limitations Capital Structure Will companies shift to less debt financing and rely more on equity? Will companies with foreign operations shift more debt to other jurisdictions? 22

23 Direct Impact of Tax Rate Change on Cost of Equity CAPM & Betas If using CAPM to estimate cost of equity, beta represents operating risk and financing risk. E(R i ) R f β ERP RP s Beta risk typically measured by looking back at changes in specific stock returns over time compared to changes in the overall stock market goal is to obtain a forward looking risk measure Tax regime over look-back period differs from current tax regime. Change in tax rate may impact financing risk component depending on formula chosen to estimate beta and amount of debt in capital structure. 23

24 Impact on Cost of Debt Overview Part 1: After-tax Cost of Debt will likely increase, because of lower interest tax shields Corporate Tax Rate = 35% 21% Pre-Tax Cost of Debt 4.5% 4.5% After-Tax Cost of Debt 2.9% 3.6% % Increase 24.1% Duff & Phelps February 21,

25 Impact on Cost of Debt Overview Part 1: After-tax Cost of Debt will likely increase, because of lower interest tax shields Corporate Tax Rate = 35% 21% Pre-Tax Cost of Debt 4.5% 4.5% After-Tax Cost of Debt 2.9% 3.6% % Increase 24.1% Duff & Phelps February 21,

26 Interest Expense Deductibility Limitation Part 2: Cost of Debt may increase, because of interest expense limitation For tax years after 12/31/17 deductions for interest expense is limited to the sum of: 1) Business interest income (excludes investment interest); 2) 30% of Adjusted Taxable Income (as defined below); and 3) Floor plan financing interest (dealership inventory financing) Adjusted Taxable Income 30% Tax EBITDA 30% Tax EBIT Different definition of adjusted taxable income for passthrough entities Disallowed interest expense carried forward indefinitely Valuation impact will be greater for highly-levered companies, cyclical or unprofitable businesses 26

27 Interest Expense Deductibility Limitation Example Debt $100.0 [A] Notes Notes Pre-Tax Cost of Debt 7.5% [B] Interest Expense - Before Limitation [C] = [A] * [B] Tax EBITDA [D] Tax EBIT [E] EBITDA 30% 6.0 n/a [F] = 30% * [D] EBIT 30% n/a 4.5 [G] = 30% * [E] Overall Interest Expense Limitation [H] = Max { [F], [G] } Currently Allowed Interest Expense [ I ] = Min { [C], [H] } Disallowed Interest Expense [J] = Max{ 0, [C] - [ I ] } Interest Tax 21% [N] [K] = 21% * [ I ] Effective Tax Rate on Interest Expense 16.8% 12.6% [L] = [K] / [C] After-Tax Cost of Debt 5.9% [O] = [B] * (1 [N] ) 6.2% 6.6% [M] = [B] * ( 1 - [L] ) % Increase from Full Deductibility 5.3% 10.6% [P] = [M] / [O] 1 Duff & Phelps February 21,

28 Selected Tips Testing Projections Downside risk impact in projections and valuation: Companies with significant debt and/or low EBITDA or EBIT margins more likely to be impacted by interest expense limitation Management projections often do not include downside scenarios that occur in cyclical businesses or in recessions Risk of interest rate limitation increases when downside occurs If scenarios not used test downside impact, with potential corresponding increase in cost of capital should (incremental interest expense limitations + other risks) Cannot simply assume interest expense limitations will not apply given 2017 actual or expected 2018 results, without testing Duff & Phelps February 21,

29 More Information on Cost of Capital Cost of Capital: Applications and Examples 5 th ed. by Roger J. Grabowski and Shannon P. Pratt (John Wiley & Sons) 29

30 4 Pass-Through Entities

31 Pass Through Entities (PTEs) Key Features Come in a variety of legal forms, most commonly as S corporations ( S corps ), limited liability companies (LLCs) or partnerships C corporations ( C corps ) are subject to taxation at both the corporate and shareholder levels PTEs are not subject to federal entity taxation, but their owners (shareholders, members or partners) are taxed on their personal tax returns at individual rates, based on their proportionate share of the entity s taxable income, regardless of cash distributions 31

32 Pass Through Entities Available Cash Flow to Owners Under Prior Tax Law The following illustrates the difference in net after-tax cash flow to the shareholders for a company structured as a C corp. vs. an S corp. that earned $100 under previous tax law C Corp. S Corp. Income Before Taxes $100 $100 Corporate Tax Rate (federal & state) 38% 0% Available Earnings $62 $100 Dividend or Personal Tax Rate 28% 46% Available After Dividends $44.64 $54.00 Based on this example, the pass through earnings premium over C corp. status is approximately 21% (= 54/44.64), based on a single period analysis Duff & Phelps February 21,

33 Pass Through Entities Changes due to The 2017 Act Top marginal individual tax rate reduced from 39.6% to 37.0%, but reverts back to 39.6% after December 31, 2025 Itemized deductions for SALT limited to $10,000, offsetting some benefits of the individual rate deduction Qualified Business Income ( QBI ) deduction of 20% of pass-through business income available to owners Generally limited to the greater of 50% of W-2 wages, or sum of 25% of W-2 wages, plus 2.5% of qualified property Sunsets after 2025 Does not apply to service businesses such as law and accounting firms 33

34 Pass Through Entities Changes due to The 2017 Act Given sunsetting of key provisions, when valuing a PTE, it is: Inappropriate to apply a single period capitalization method when applying the Income Approach Discrete forecast period needs to be extended beyond expiration of temporary provisions 34

35 Pass Through Entities Available Cash Flow to Owners Under the 2017 Act with availability of QBI Deduction The following illustrates the difference in net after-tax cash flow to the shareholders for a company structured as a C corp. vs. an S corp. that is eligible for the QBI deduction C Corp. S Corp. Income Before Taxes $100 $100 Corporate Tax Rate (federal & state) 25% 0% Available Earnings $75 $100 Dividend or Personal Tax Rate (federal & state) 29% 38% Available After Dividends $ Based on this example, the earnings available to shareholders of both C corps and S corps have increased from the prior example, with the pass through earnings premium over C corp. status of approximately 16% (= 62/ 53.25), lower than the premium under prior tax law Duff & Phelps February 21,

36 Pass Through Entities Available Cash Flow to Owners of Service Companies Under the 2017 Act The following illustrates the difference in net after-tax cash flow to the shareholders for a company structured as a C corp. vs. an S corp. that is a service company not eligible for the QBI deduction C Corp. S Corp. Income Before Taxes $100 $100 Corporate Tax Rate (federal & state) 25% 0% Available Earnings $75 $100 Dividend or Personal Tax Rate 29% 46% Available After Dividends $53.25 $54.00 Based on this example, the pass through earnings premium over C corp. status has virtually disappeared, which will be the case for all S corps after 2025 Duff & Phelps February 21,

37 5 International Provisions

38 International Provisions Summary The 2017 Act implemented many changes which will impact how the U.S. will tax global operations of U.S. multinational corporations. The U.S. has effectively moved from a global tax system to a hybrid territorial and global tax system. Key International provisions are: 100% Dividends received deduction (DRD) in the US for dividends received from certain eligible CFCs; different DRD s apply for different types of dividends Repatriation GILTI FDII BEAT Immediate taxation of deemed repatriated cumulative untaxed foreign earnings Global Intangible Low-Taxed Income Foreign Derived Intangible Income deductions Base Erosion Anti-Abuse Tax Duff & Phelps February 21,

39 Immediate Taxation of Deemed Repatriated Cumulative Untaxed Foreign Earnings Repatriation Immediate taxation of deemed repatriated cumulative untaxed foreign earnings As part of the transition to a 100% DRD system, accumulated foreign earnings post 1986 not subject to US-tax will be subject to US tax at a reduced tax rate payable in a lump sum or in 8 annual installments. Reduced tax rates are applied to these deemed repatriated earnings at 15.5% for cash and equivalents and 8.0% for other assets. Duff & Phelps February 21,

40 Global Intangible Low-Taxed Income ( GILTI ) GILTI Global Intangible Low- Taxed Income Income classified as GILTI will be subject to immediate US corporate tax. GILTI is calculated as aggregate net controlled foreign corporation ( CFC ) income less a return to QBAI tangible assets for US tax purposes (=10% return on the aggregate CFC NBV of tangible assets for US tax purposes less CFC net interest expense). Depending on overall US taxable income, a deduction of up to 50% of the GILTI 1 can potentially reduce the effective US tax rate on GILTI to 10.5%. Note: Intangible income for GILTI purposes does not need to relate specifically to intangibles. For US tax purposes the calculation is formulaic (effectively the excess over a return to tangible assets). Transfer pricing principles still apply to where real intangible income is earned. 1 Foreign taxes paid can also be used to reduce the applicable tax on GILTI Duff & Phelps February 21,

41 Foreign Derived Intangible Income ( FDII ) Deduction FDII Foreign Derived Intangible Income deductions The Act allows for a potential deduction for FDII which is US taxable income earned from exploiting U.S. IP in foreign markets. The FDII deduction is 37.5% for taxable years beginning before 2026 and % for 2026 and beyond. The deduction is subject to limitations depending on US taxable income. 41

42 Base Erosion Anti-Abuse Tax ( BEAT ) BEAT The BEAT requires US taxpayers to pay an excise tax equal to 10% on payments considered to base erode U.S. taxable income. These base erosion payments are payments made to a foreign related party (excluding COGS). The BEAT only applies to: Base Erosion Anti-Abuse Tax U.S. taxpayers with $500 million in average annual gross receipts for the three-year period ending with the preceding taxable year; and A base erosion percentage of 3% (of aggregate deductions) or higher for the taxable year. Duff & Phelps February 21,

43 Definition of Intangibles and Considerations for Transfer Pricing Values The Act has included in the list of compensable intangibles goodwill and going concern and also requires consideration of a taxpayer s realistic alternatives when determining the transfer pricing value. 43

44 Questions? Contact Us

45 Grabowski, Roger Managing Director, Valuation Advisory Services Roger J. Grabowski, FASA, is a Managing Director with Duff & Phelps LLC and an Accredited Senior Appraiser and Fellow (FASA) of the American Society of Appraisers (ASA) (their highest designation), Business Valuation. He was formerly Managing Director of the Standard & Poor's Corporate Value Consulting practice, a partner of PricewaterhouseCoopers LLP and one of its predecessor firms, Price Waterhouse (where he founded its U.S. Valuation Services practice and managed the real estate appraisal practice). He has directed valuations of businesses, interests in businesses, intellectual property, intangible assets, real property and machinery and equipment. Roger has been recognized in various courts as an expert on matters of solvency, the value of closely held businesses and business interests, valuation and amortization of intangible assets and other valuation issues. His testimony in U.S. District Court was referenced in the U.S. Supreme Court opinion decided in his client's favor in the landmark Newark Morning Ledger case. Duff & Phelps, LLC Chicago Roger.Grabowski@duffandphelps.com Roger is co-author with Shannon Pratt of Cost of Capital: Applications and Examples, 5th ed. (John Wiley & Sons, 2014), The Lawyer's Guide to Cost of Capital (ABA, 2014), and Cost of Capital in Litigation: Applications and Examples (John Wiley & Sons, 2010). He is co-author of the Duff & Phelps annual resources for cost of capital data: Valuation Handbook-Guide to Cost of Capital, Valuation Handbook-Industry Cost of Capital, International Valuation Handbook - Guide to Cost of Capital and International Valuation Handbook - Industry Cost of Capital (John Wiley & Sons). Roger teaches courses for the American Society of Appraisers including Cost of Capital, a course he developed. 45

46 Johnson, Michelle Managing Director, Valuation Advisory Services Michelle Johnson has been practicing transfer pricing for over fifteen years. A managing director, Michelle has significant experience advising clients on transfer pricing and valuation matters, including global transfer pricing documentation preparation, ASC 740 (FIN 48) recognition and measurement analyses, intangible property valuation, and transfer pricing policy development. Michelle is a member of Duff & Phelps financial services team and has significant experience assisting companies with pricing matters involving asset management, insurance, banking, and global dealing transactions. Michelle is also a frequent speaker on intercompany services transactions and has performed dozens of analyses in this area. Duff & Phelps, LLC Chicago Michelle.Johnson@duffandphelps.com In addition to preparing documentation, restructuring and planning assistance for companies ranging from startups to Fortune 100 firms, Michelle has been called upon as a transfer pricing expert in numerous audit defense matters. Previously, Michelle led the development of Ceteris ASC 740 (FIN 48) service line and pioneered several thought leadership publications on behalf of the firm. She is an award-winning speaker and has presented at numerous conferences and seminars regarding transfer pricing issues. She served as co-editor of the Wolters Kluwer Guide to International Transfer Pricing: Law, Compliance and Tax Planning Strategies, and co-authored the BNA Tax Management Portfolio on ASC (FIN 48) (published 2012). Michelle also oversaw Ceteris US operations and was responsible for quality and training of the companys US transfer pricing practice. Earlier in her career, Michelle was part of Ernst & Youngs transfer pricing practice, having spent time in the companys Chicago, San Jose and New York offices. Michelle obtained her Masters degree in Economics from New York University and a BS in Economics and French, with a minor in Mathematics, from the University of Illinois (magna cum laude). 46

47 Levin, Nathan Managing Director, Valuation Advisory Services Nate Levin is a managing director in the Boston office, part of the Valuation Advisory Services business unit, and the global leader of the tax valuation service line. He has 29 years of experience and focuses on consumer and industrial product companies. Nates areas of expertise include the valuation of business enterprises, debt and equity securities, intangible assets, intellectual property and options and warrants for purposes of financial and tax reporting, intercompany transfer pricing, mergers and acquisitions planning, reorganizations and restructurings, joint venture planning, financing and stockholder litigation. Nate has testified on valuation matters in New York State Supreme Court, Commonwealth of Massachusetts Trial Court, U.S. District Court in New Hampshire and Superior Court of Justice, Ontario, Canada and served as a valuation arbitrator in minority shareholder disputes. Duff & Phelps, LLC Boston Nathan.Levin@duffandphelps.com Prior to Duff & Phelps, Nate was a managing director at Standard & Poors Corporate Value Consulting (CVC), the predecessor firm to Duff & Phelps. Prior to S&P, Nate was a partner in PricewaterhouseCoopers CVC practice. Nate received his M.B.A. in finance, with high honors, from Boston Universitys Graduate School of Management, his B.S. in finance and accounting, magna cum laude, from Boston University and attended Northwestern University, where he majored in anthropology. He is also a Chartered Financial Analyst ("CFA") charterholder, an accredited member of the American Society of Appraisers ("ASA"), certified in business valuation and a member of the Boston Security Analysts Society. 47

48 Nunes, Carla Managing Director, Valuation Advisory Services Carla Nunes is a managing director in the in the Office of Professional Practice, where she provides firm-wide technical guidance on a variety of valuation, financial and tax reporting issues. In 2011, Carla completed a oneyear rotation in Duff & Phelps' London office, where she promoted the firm's IFRS education efforts and marketing initiatives, while also dealing with IFRS implementation matters. Prior to this role, Carla was part of the Valuation Advisory Services practice, focusing on the valuation needs of primarily consumer and industrial product companies at Duff & Phelps and its predecessor firms, PricewaterhourseCoopers and Standard & Poor's. She has 21 years of experience providing a variety of valuation, financial reporting, and tax services. Duff & Phelps, LLC Philadelphia Carla.Nunes@duffandphelps.com Carla has conducted numerous business and asset valuations for a variety of purposes, including purchase price allocations, goodwill impairment testing, mergers and acquisitions, corporate tax restructuring and debt analysis. She has been involved in multiple valuation assignments for a wide range of industries, including pharmaceutical, biotechnology, healthcare, vitamin retail, specialty chemicals, industrial manufacturing and gaming and hospitality. Carla has substantial experience working with multinational companies, having addressed complex tax, international cost of capital and foreign exchange issues. She is also one of Duff & Phelps' experts in addressing valuation issues related to cost of capital. She authored a chapter entitled "Cost of Capital for Divisions and Reporting Units" included in the 4th and 5th editions of the textbook Cost of Capital: Applications and Examples (2014), by Shannon Pratt and Roger Grabowski. She was a contributing author to the chapter "Risk-free Rate" in the 5th edition. She is also a co-author of the Duff & Phelps Valuation Handbook series: (1) Valuation Handbook - U.S. Guide to Cost of Capital; (2) Valuation Handbook - International Guide to Cost of Capital; (3) Valuation Handbook - U.S. Industry Cost of Capital; and (4) Valuation Handbook - International Industry Cost of Capital. Carla received her M.B.A. in finance from the University of Rochester's Simon School, completed coursework for a Masters of Taxation from Villanova University School of Law and received an honors degree in business administration from the University of Lisbon. She also holds a Chartered Financial Analyst (CFA) designation and is a member of the CFA Institute, the CFA Society of Philadelphia, and the AICPA. Carla is a native Portuguese speaker. 48

49 For more information about our global locations and services, please visit: About Duff & Phelps Duff & Phelps is the premier global valuation and corporate finance advisor with expertise in complex valuation, disputes and investigations, M&A, real estate, restructuring, and compliance and regulatory consulting. The firm s more than 2,000 employees serve a diverse range of clients from offices around the world. For more information, visit M&A advisory, capital raising and secondary market advisory services in the United States are provided by Duff & Phelps Securities, LLC. Member FINRA/SIPC. Pagemill Partners is a Division of Duff & Phelps Securities, LLC. M&A advisory and capital raising services in Canada are provided by Duff & Phelps Securities Canada Ltd., a registered Exempt Market Dealer. M&A advisory and capital raising services in the United Kingdom and across Europe are provided by Duff & Phelps Securities Ltd. (DPSL), which is authorized and regulated by the Financial Conduct Authority. In Germany M&A advisory and capital raising services are also provided by Duff & Phelps GmbH, which is a Tied Agent of DPSL. Valuation Advisory Services in India are provided by Duff & Phelps India Private Limited under a category 1 merchant banker license issued by the Securities and Exchange Board of India.