7. Summary and conclusions The estimate of cost of equity capital for private firms and divisions continues to be an important problem for practitioners and researchers. It is frequently desirable to be able to estimate the market-priced cost of equity for divisions or projects which do not have publicly traded dividend-paying equity securities. CAPM is a widely accepted method of estimating the market-priced risk for firms with publicly traded securities, so CAPM estimates of required returns were taken as benchmarks. Cluster analysis was used to select proxies for target firms (pseudo-divisions) based on their accounting data. The cluster analysis method was shown to be useful in predicting the cost of equity capital for the target using that target’s accounting data by selecting proxies for the target from publicly traded firms. These results establish the usefulness of the cluster analysis approach to cost of equityestimation and suggest potential benefits for further application of the cluster approach to related financial problems.