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 DCF 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.
Answer the following statement true (T) or false (F)
True
Rationale: True, but data on comparable publicly owned firms can often be obtained and used as proxies for private firms.
You might also like to view...
(Direct Materials + Direct Labor + Overhead) / Total Number of Units Produced = Product Unit Cost
Indicate whether the statement is true or false
A global brand refers to
A. a brand marketed under different names in multiple countries with similar and centrally coordinated marketing programs. B. two or more international products that coincidentally share the same brand name but represent two completely unrelated products. C. two or more domestic products that coincidentally share the same brand name but represent two completely unrelated products. D. a brand marketed under the same name in multiple countries with similar and centrally coordinated marketing programs. E. a brand that is essentially the same but that has had minor adaptations made to meet the more specific needs of different nations.
In Japan, 90-day securities have a 4% annualized return and 180-day securities have a 5% annualized return. In the United States, 90-day securities have a 4% annualized return and 180-day securities have an annualized return of 4.5%. All securities are of equal risk, and Japanese securities are denominated in terms of the Japanese yen. Assuming that interest rate parity holds in all markets, which of the following statements is most CORRECT?
A. The yen-dollar spot exchange rate equals the yen-dollar exchange rate in the 90-day forward market. B. The yen-dollar spot exchange rate equals the yen-dollar exchange rate in the 180-day forward market. C. The yen-dollar exchange rate in the 90-day forward market equals the yen-dollar exchange rate in the 180-day forward market. D. The yen-dollar exchange rate in the 180-day forward market equals the yen-dollar exchange rate in the 90-day spot market. E. The relationship between spot and forward interest rates cannot be inferred.
A very important attractive feature of a corporation is its:
a. taxation b. ease of formation c. lack of regulation d. limited life e. liability