Cost Of Equity: An Empirical Study In A Small Brazilian Company
: Cost of equity is a crucial information that enters business decision. For publicly traded firms, calculating the cost of capital is predicated typically an information from the stock market. However, privately firms do not have market based information available. Thus, owners and managers have difficulty in determining the capital cost for these organizations. This paper aims at presenting an alternative for the beta calculation of private and small sized companies. The exemplification of this calculation is made for the Brazilian industrial company ARTE POLIESTER. For such, 9 years (2008 to 2016) data are obtained from companies listed on the Brazilian stock exchange, belonging to the industrial economic sector from the IQ Capital (S&P) database. Having the accounting beta defined, the estimation of the industrial company’s cost of equity can be made by Capital Asset Pricing Model (CAPM).
Keywords: private companies, accounting beta, CAPM.