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CS Professional · Corporate Restructuring, Valuation and Insolvency · Overview of Business Valuation

Kaveri Pharma Ltd, an unlisted company, is to be valued for a share swap. The valuer finds that a minority stake of 8% is being transferred and the shares are rarely traded. Which adjustment pair is most relevant to this fact pattern?

A minority discount and a discount for lack of marketability fit best. An 8% stake carries no control over decisions, and rarely traded unlisted shares cannot be sold easily, so both factors reduce the value per share compared with a controlling, liquid holding.

  1. AControl premium and liquidity premium
  2. BMinority discount and discount for lack of marketabilityCorrect
  3. CSynergy premium and goodwill write-off
  4. DRevaluation surplus and depreciation add-back

Explanation

A small stake gives no control, which attracts a minority discount. Rarely traded unlisted shares are hard to sell, which attracts a discount for lack of marketability. A control premium would apply to a controlling block, so it does not fit.

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