Hello,
In the reading for Private Company Valuation, cost of equity is given as:
Expanded CAPM:
Cost of equity = RFR + (beta * ERP) + SP + SCRP
Build-up method
Cost of equity = RFR + ERP + SP + SCRP + IP
So industry risk premium (IP) is in the build-up method but not expanded CAPM. However, in the section on Corporate Issuers, it is the reverse - IP is in expanded CAPM but not build-up method.
So is there a universally correct formula?