Cost of Equity and Debt
  • Hello,

    How does the cost of equity of the target affect an LBO or investment decision? This is a private company and I know that publicly traded entities with the same risk characteristics have a cost of equity of 8.5%. I am wondering if it affects anything other than the initial standalone valuation used to determine the purchase price. or the same company their interest expense / avg long term debt is 3.25%. Can I use this as their cost of debt going forward? Seems significantly smaller than the cost of equity.

    Any help will be apprecited.

    I didn't find the right solution from the Internet.

    References:
    http://www.wallst-training.com/wstforum/viewtopic.php?f=4&t=364#p777
    Infographic Video Studio

    Thank you.

Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!