Estimates of U.S. Beta Adjusted Size Premia Market Cap Range Size (Millions) Premium $1,379.267 to $1,946.588 1.67% $977

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Estimates Of U S Beta Adjusted Size Premia Market Cap Range Size Millions Premium 1 379 267 To 1 946 588 1 67 977 1 (304.39 KiB) Viewed 45 times

Estimates of U.S. Beta Adjusted Size Premia Market Cap Range Size (Millions) Premium $1,379.267 to $1,946.588 1.67% $977.912 to $1,378.476 1.62% $627.017 to $976.624 2.28% $314.912 to 9 $626.955 2.70% 10 $2.247 to $314.433 6.27% Source: CFA Curriculum Readings Level II (Readings 35, p. 89) a) Based on build-up method Based on build-up method (1), how much is an estimate of the cost of equity for the private company? (2 points) b) Assume you decided to use a risk premium of 3.5% in the bond yield plus risk premium approach, how much is estimate of the cost of equity for the company? (2 points) In your written response, please start with question numbers such as a) or b) before showing your work and answer to the question. EXHIBIT Market Cap Decile 6 7 8