Purpose – The purpose of this paper is to propose and test a method for selecting a portfolio of public firms which can be used for computing the cost of equity capital for a non-public firm or division of a firm. Design/methodology/approach – This method relies on cluster analysis and a...

Purpose – The purpose of this paper is to propose and test a method for selecting a portfolio of public firms which can be used for computing the cost of equity capital for a non‐public firm or division of a firm. Design/methodology/approach – This method relies on cluster analysis and a...