Question

Prof. Damodaran, I want to know in private firms which is the equity value you use to compute capital cost? as in publicly traded companies is E=shares outstanding * shares price, which is the correct way to do it in private companies?
thanks in advance...

Answer 1

You can use one of these 2 assumptions:
-Assume that the private firm will move to the industry average debt ratio.
-The beta for the private firm will converge on the industry average beta.