A recent startup technology company that has a very low market cap is looking to calculate the return required by share holders using the build-up method. Historically, long-term government bonds have been 4.8%, and the equity risk premium is approximately 6%. The startup premium and the micro-cap premium are both 5%.
What is the return required by share holders?
Answer 20.8% 15.8% 10.8% 6.0%
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Required rate of return under build-up method: Build-up method is used in small and... View the full answer