Estimering av kapitalkostnad för onoterade företag
The cost of capital for traded companies is basically assessed on information from thefinancial market. Small and non-traded companies are lack of this necessary financialmarket information in order to determine an appropriate equity risk premium and tocompute the cost of capital.In the absence of financial information necessary for an external investor, it is difficult toevaluate a non-traded company with the Capital Asset Pricing model (CAPM), which isbased on the financial market information. It measures only the systematic risk, which isthe contribution of one share to the market risk of a portfolio. It is therefore important tofind models that reflect the small and non-traded companies? real business value and theirunique characteristics. The shortcomings of current models, such as CAPM, have led toattempts to develop new alternative models that can make a proper measure for theunlisted companies? cost of capital. One such model is the AHP model (AnalyticalHierarchy Process) developed by Cotner & Fletcher (2000). The AHP model is based onthe fact that investors do not necessarily depended on financial market information inorder to mature a capital cost for the unlisted companies.The AHP model is based on the idea that the owners of unlisted traded companies do notsee their company as part of a well diversified portfolio. Therefore not only the systematicrisk should be considered for an appropriate estimation of the risk premium in the capitalcost. Capital cost should be based on total riskPurpose: To provide a comprehensive description, empirical testing and analysis of theAHP model to show how to estimate the cost of capital for untraded companies.Method: Data collection for this paper is based on secondary data which means data inthe form of articles and other relevant literature.Conclusion: It is difficult to believe that the AHP model can replace the CAPM and beused as an alternative model for the estimate cost of capital for both traded and nontraded companies. However, the model might be used by non-traded company executiveswho have fairly good insight into the company and thus can estimate the risk levels andrisk premium for the company in a reasonable manner. As a conclusion, it can beassumed that the AHP model is not an appropriate analytical tool to be used by banksand fund managers that have basically diversified investments