| Risk-free rate | 3.5% | ||
| Equity risk premium | 4.0% | ||
| Small size premium | 3.5% | ||
| Specific-company premium | 2.0% | ||
| Beta | 1.2 | ||
| Growth rate | 3.0% |
(Question)
The required return estimate that is calculated from the Exhibit above reflects all adjustments needed to make an accurate valuation of the company.
Is this statement correct?
Answer: No, it's incorrect.
An issue not described in the Exhibit is control premium. Any control premium adjustment is normally added directly to a company's value estimate.
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