A New And Better Way To Measure The Cost Of Equity Capital For Small Closely Held Firms

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Denis O. Boudreaux
Spuma Rao
Jim Underwood
Nancy Rumore

Keywords

New Approach for Cost of Equity Capital, Return on Investment for Small Firms, Build Up Model for Measuring Cost of Equity

Abstract

The purpose of this paper is to explore the theoretical structure that underlies the valuation process for small closely held firms.  Specifically, cost of capital estimate methods which appear in the current literature are examined, and a theoretically correct and simple method to measure cost of equity capital for privately held companies is offered. 

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