Question

Using the information below to estimate equity beta for the private company: Comparable Companies Tax rate...

Using the information below to estimate equity beta for the private company:

Comparable Companies Tax rate D/E Equity Beta
Private company 30 1
Public company 35 0.9 1.75

1.053

1.877

1.029

1.104
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Answer #1

The reason to go for this approach is due to insufficiency of market data of private companies (some companies will not be traded so )to estimate the beta we use approximation models like comparing from publi companies.

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