Question:

Would you expect the cost of equity to be higher for a $1 billion or $100 million market cap company?

Answer hidden.

Answer:

We would expect the cost of equity to be higher for the $100 million market cap company because all else being equal, smaller companies are considered "riskier" than larger companies.

This means that investors in the $100 million company would expect a higher return (or higher cost of equity) to reflect the higher risk.

Other

DCF

Would you expect the WACC to be higher for a $1 billion or $100 million market cap company?

DCF

How do you calculate cost of equity?

DCF

How do you determine the discount rate in a DCF?

DCF

What happens to WACC as you increase leverage?

DCF

How do you calculate WACC for a private company?

DCF

Which company would we expect to have a higher beta, an industrials company or an internet company?

DCF

Why do you usually project out 5-10 years in a DCF?

DCF

Walk me through a DCF

DCF

Walk me through how to get from Revenue to Unlevered Free Cash Flow in your DCF projections

DCF

How do you select the appropriate exit multiple when calculating terminal value?

DCF

What happens if you use Levered Free Cash Flow instead of Unlevered Free Cash Flow in your DCF?

DCF

What is the mid-year convention and why would you use it in a DCF?

DCF

What is a potential issue with basing terminal multiples on current public company multiples?

DCF