If a firm is privately owned, and its stock is not traded in public markets, then we cannot measure its beta for use in the CAPM model, we cannot observe its stock price for use in the dividend growth model, and we don't know what the risk premium is for use in the bond-yield-plus-risk-premium method.All this makes it especially difficult to estimate the cost of equity for a private company.

Question

Quizplus · Accepted Answer

Private companies do not have publicly traded stock, which makes it difficult to obtain the necessary information to calculate the cost of equity using certain models.

If a Firm Is Privately Owned, and Its Stock Is