The Private Companies and Cost of Capital

Submit ONE-page argument using Toulmin’s Model to make your best argument for or against the question: Are small private companies overvalued? Post in reply rather than attachment.

Background: The Build-up method for estimating the cost of capital in the valuation of a privately held company, relies mostly on information from active markets for publicly traded stocks. Does this information cause an underestimation of the capitalization or discount rate? You can reference the paper in files, Week 13, Company Specific Risk and Small Company Valuation .