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

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

Image Transcription

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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