Stealth Sports

Estrada, Javier

Product #:F-0976-E

Supplier:IESE Publishing

Discipline:Finance

Setting:Estados Unidos

Details:Case (PDF) • 2 pages • 2021-10-08

Subjects:

Finance and investing

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$10.54

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Early in 2020, Pamela Taggart, the recently-appointed CFO of Stealth Sports (a non-publicly traded company), had one overriding task and little time to waste: She needed to estimate a hurdle rate to force some discipline in the decision-making process of the company. Her problem was that, unlike some of the companies she had worked for before, Stealth was not publicly traded. That complicated her job but did not make it impossible. This case is designed to estimate the cost of capital of a private, non-traded company.

Learning Objectives

Calculation of the cost of capital of a company that does not issue publicly traded stocks and bonds. The information provided includes a target capital structure and an expected cost of debt for that capital structure. The main job to be done is the estimation of Stealth?s cost of equity, and particularly its beta, which needs to be inferred from the beta of comparable, publicly traded companies.