Session 10: Bottom up Betas - Private Businesses

In this quiz-shortened class, we started by looking at the process of estimating betas for the remaining public companies in the mix, with financial service companies being treated a little differently, because debt is impossible to nail down, and levering and unlevering betas is tough to do. We also examined how to estimate the cost of equity of a private company, and why it may be higher than an otherwise equivalent public company.
Slides: pages.stern.ny...
Post class test: pages.stern.ny...
Post class testsolution: pages.stern.ny...
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[@OlgaHerbert-to5hh]

Among the different business classifications, the real estate business is among the least risky. We also have different types of real estate investments, such as: Rental of Houses, Apartments, Commercial premises, location where the property is located, etc... The growth potential of the area also depends, because the percentage of vacancy in the area rent can change. My experience has told me that commercial premises are the most profitable for each monetary unit invested, while small houses, aimed at a low economic level, are the least profitable.

[@PradeepSingh-vo1xs]

If private equity is using an additional 10% as premium which is high, is that means private business are in general undervalued?