Title
Finding The Discount Rate For A Private Firm Using Public Comparables
Document Type
Article
Publication Date
1-1-2014
Publication Title
Review Of Business & Finance Studies
Department
Business and Leadership
Abstract
Determining the cost of equity is one of the most difficult problems in corporate finance. In this paper, we present a simple estimation example using an internet start-up company. We use public firm comparables for beta, making adjustments for leverage using Harris and Pringle's (1985) assumptions, rather than Hamada's (1972). While we consider adjustments for size, unsystematic risk, and illiquidity, we argue that significant adjustments to a Capital Asset Pricing Model approach using public comparables may be unnecessary.
Volume
5
Issue
1
pp.
37-49
ISSN
2150-3338
Provider Link
http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=90184881&site=ehost-live&scope=site
Citation
Livingston, Lynda S.. 2014. "Finding the Discount Rate for a Private Firm using Public Comparables." Review Of Business & Finance Studies 5(1): 37-49.