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An addition to the cost of equity for smaller companies, on the argument that they carry risks a beta measured against a large-cap index does not capture. Decile figures are published and widely used in valuation practice. The counter-argument, which you should know, is that the effect largely disappeared after the early 1980s and that adding one often double-counts risk already in the beta.
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This term comes up constantly in valuation interviews and on the desk.
DCF interview questions guideRelated Valuation terms
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