If a Firm Is Privately Owned, and Its Stock Is

question 22

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 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.

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Definitions:

Stroking

The act of gently rubbing or touching something or someone, often in a manner that is soothing or affectionate.

Foot

The lower extremity of the leg below the ankle, on which a person stands or walks.

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Newborn infants, particularly within the first 28 days of life, a critical period for adaptation outside the maternal environment.

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The ability or process of identifying and responding to changes in position or motion of objects.