Assume a minority shareholder holds 10% of a private firm’s equity, with the CEO holding the other 90%. Using normalized earnings, the value of the firm’s equity is estimated at $20 million. The CEO refuses to sell the firm and the minority shareholder cannot sell their interest easily. A discount for lack of marketability (DLOM) of 15% will be applied. A discount for lack of control (DLOC) will also be estimated. Using reported earnings instead of normalized earnings provides an estimated firm equity value of $19 million. Which of the following is closest to the value of the minority shareholder’s equity interest?
Given these figures, the value of the minority shareholder’s equity interest is:
| Firm's equity value |
$19,000,000 |
| Minority interest |
10% |
| Value of minority interest without discounts |
$1,900,000 |
| minus DLOC of 0% |
0 |
| Value of interest if marketable |
$1,900,000 |
| minus DLOM of 15% |
$285,000 |
| Value of minority interest |
$1,615,000 | | 
发表于 2011-3-21 14:01
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