Company Size premium and Capital Structure diuring capital budgeting

  1. 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.

  1. 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!:slight_smile: