- Should we add a size premium during the Capital budgeting process? Say there is a small company (that wpould bear a size poremium uner normal conditions), assessing to invest in a project. Should the size of that investment be of consern to us? i.e. should we be using any premia in the discount rate for that coapital budgeting purpose?
p.s. I konw many disaggree with size premium, but suppose it stands true.
- How does capital structure fit into the WACC calculation? Should we use that of comparable companies (whence pure play betas came from) or that of the company acquiring the investment? I tend towards the latter (probably read it from somewhere-don’t remember).
Would appreciate any input into this. Many thanks!