If a Firm Is Privately Owned,and Its Stock Is Not

question 18

True/False

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.

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Definitions:

Aden/o

A prefix used in medical terminology referring to glands, particularly relating to glandular structures.

Combining Form

A word root to which a vowel is added for easier pronunciation before it is combined with another term, often used in medical terminology.

Gland

An organ in the body that secretes chemical substances for use in the body or for discharge into the surroundings.

Femor/o

A prefix in medical terminology related to the femur or thigh bone.