| Build-up Method | Risk-Premium Approach | Bond-Yield Plus Risk Premium Method (*4) | |
| Applicable for a closely held companies? | Yes(*3) | ||
| Beta required? | No | Yes | |
| A company's publicly traded debt required? | Yes | ||
| values as estimates | typically historical (*2) |
Bond-Yield Plus Risk Premium Method:
required return = ri= YTM(*1) of the company's long-term debt + Risk Premium
(*1) YTM: Yield To Maturity
(*2) that may not be relevant to current market conditions (weakness of the model)
(*3) where betas are not readily obtainable
(*4) The method simply adds a risk premium to the yield to maturity of the company's long-term debt.
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