Suppose a very large multi-Billion dollar, well known privately held company named Private Co. has decided to go public. You have been charged with analyzing the company's expected return. Because the privately held company doesn't have historical return data, you have decided that even though the Build-up method is used for small businesses, here, the Build-up method might be appropriate. Your analysis includes the following information: 8. Comparable Industry Returns Bond yields 5% Equity risk premium = 7% Micro-cap premium = 4% Start-up premium = 4% Private Co. Required Rate of Return

Suppose a very large multi-Billion dollar, well known privately held company named Private Co. has decided to go public. You have been charged with analyzing the company's expected return. Because the privately held company doesn't have historical return data, you have decided that even though the Build-up method is used for small businesses, here, the Build-up method might be appropriate. Your analysis includes the following information: 8. Comparable Industry Returns Bond yields 5% Equity risk premium = 7% Micro-cap premium = 4% Start-up premium = 4% Private Co. Required Rate of Return

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter21: Dynamic Capital Structures And Corporate Valuation

Section: Chapter Questions

Problem 5MC: David Lyons, CEO of Lyons Solar Technologies, is concerned about his firms level of debt financing....

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Question

Suppose a very large multi-Billion dollar, well known privately held company named Private Co.
has decided to go public. You have been charged with analyzing the company's expected
return. Because the privately held company doesn't have historical return data, you have decided that
even though the Build-up method is used for small businesses, here, the Build-up method might be
appropriate. Your analysis includes the following information:
8.
Comparable Industry Returns
Bond yields 5%
Equity risk premium = 7%
Micro-cap premium = 4%
Start-up premium = 4%
Private Co. Required Rate of Return

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