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:

Penicillin

is a group of antibiotics derived from Penicillium fungi, used in the treatment of bacterial infections by inhibiting cell wall synthesis.

Petrified Wood

The result of a tree or tree-like plants having completely transitioned to stone by the process of permineralization.

Organization

A structured group of people who work together to achieve a particular goal, often structured in a specific way to facilitate that goal.

Membrane-Bound Nucleus

A defining feature of eukaryotic cells, an enclosed nucleus separates the genetic material from the cytoplasm.