2023
DOI: 10.4236/tel.2023.133034
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Cost of Capital for Private Firms

Abstract: This paper elaborates on a new default-based cost of capital estimation for private-held firms. We test the model's ability to incorporate systematic risk and size premium. Results highlight a positive and statistically significant effect of CAPM expected return and size premiums on this novel cost of capital measure. Beyond the utility in practice for private equity valuation, preliminary results are promising for application on a larger cross-country sample.

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Cited by 2 publications
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