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:

Alarm Reaction

A stage in the General Adaptation Syndrome that involves the initial response to stress, triggering the fight-or-flight response.

Heart Rate

The number of heartbeats per unit of time, typically measured in beats per minute (bpm), indicating cardiovascular health and physical conditioning.

Blood Pressure

The force exerted by circulating blood upon the walls of blood vessels, typically measured to assess heart health.

Dopamine

A neurotransmitter that plays a key role in motivation, pleasure, and reward in the brain.