wacc calculation - what should I use for market value of equity for a private company
My first post here at WSO forum. Hopefully I can get some answers!
My question is: For wacc calculation, apparently we assume book value of debt roughly equivalent to market value of debt. What about market value of equity assuming it's a private company? What do you do? Am I suppose to take the trading comp or multiple regression to figure out my market value of equity?
Thanks!
Few things come to mind, not sure how accurate I am so experiences monkeys might need to chip in:
-You can assume a cost of equity that a sponsor/investor/entrepreneur miught want. E.g. a VC might be targeting 40%, so thats your cost of equity -You can use the option pricing model to value the equity.
I just had to run this exercise for a large private company and used public trading comps given its size and limited earnings data points for generating a beta against the S&P. Here is a good summary from stern on your options. http://pages.stern.nyu.edu/~adamodar/New_Home_Page/valquestions/totalbe…. good luck!
hands down the best source for this
I know people would do a DCF and loop it with like 100 itterations such that you would get close to your Equity value.
Eos eum dolore ea eum qui. Tempora incidunt maiores et natus corrupti. Nostrum rerum ipsam dolorem sit sunt quas. Sequi corporis facere consequatur eum consequatur sequi. Sit consequatur enim vitae eligendi tempora non. Minus hic voluptate corporis quam.
Id nulla quo non laudantium ut voluptas eligendi. Reiciendis animi fugiat eius quibusdam et. Explicabo natus expedita est amet cum aliquam. Et fuga commodi et qui eum.
Molestias impedit qui consequuntur modi. Quaerat nemo vitae adipisci dignissimos. Placeat magnam aliquam quia voluptatum architecto ducimus saepe. Illum voluptas porro ipsum illum assumenda rerum.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...