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  "documentTitle": "Bear Stearns | Investment Banking Pitch Book | 36 slides",
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  "notes": "Bear Stearns internal DCF methodology primer.",
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      "text": "Use the S&P 500 (the default setting on Bloomberg) as the market proxy in beta calculations for US stocks. The definition of the market for beta calculations should be the same as that used to calculate the market risk premium.",
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      "text": "For historical betas, always use the \"adjusted\" beta, which corrects for the convergence of most stocks to 1.00 over time, and, consequently, is a better predictor of future price movements.",
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      "text": "For companies that are not public, have short operational histories, restructured operations, or leverage that departs significantly from the industry average, it may be appropriate to use an industry average beta(1) rather than an individual company beta if good comparable companies are available.",
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      "text": "Additionally, when using DCF for sum-of-the-parts analysis, industry average betas may be appropriate for the separate business units.",
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      "text": "BARRA predicted betas can be obtained through the Investment Banking Information Center.",
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      "text": "For public companies that are being valued using DCF methodology: Starting point is the subject company's observed historical beta and/or predicted beta. As appropriate, the subject company's beta should be cross-checked versus the betas for comparable, publicly traded companies.",
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      "text": "Beta should be calculated using historical adjusted betas based on a longer time frame (5 years using monthly observations) for more stable, mature companies and a shorter period (2 years using weekly observations) for dynamic, high growth industries or for recently restructured companies. BARRA predicted betas may be used as an alternative to historical betas if this is appropriate under the circumstances.",
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      "text": "(1) The industry average beta can be calculated by taking the market capitalization weighted average unlevered beta for a group of comparable, publicly traded companies.",
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      "text": "Calculating the Equity Beta",
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