R.33 Private Company Valuation

Question 1

Discount rate adjustments for private companies.

LOS 34.g Explain factors that require adjustment when estimating the discount rate for private companies.

Answer 1

Adjustments made for:

• size premium
• Debt availability and cost
• acquirer vs target
• projection risk
• life cycle stage

Question 2

Models (3) to estimate required rate of return for private companies.

LOS 34.h Compare models used to estimate required rate of return for private company equity

Answer 2

Private company equity required return models:

• CAPM
• Expanded CAPM
• Build-up method

Question 3

Valuation discounts and premiums rankings and combined calcs

Answer 3

Question 4

Private company valuation approaches:

• 1.1, 1.2, 1.3
• 2
• 3

Answer 4

Question 5

Excess Return method

Answer 5