1. Describe how the various historical restricted stock studies were used by the appraiser to estimate the liquidity discount.
2. What other factors could the appraiser have used to estimate the liquidity discount on the unregistered stock?
3. In view of your answer to question 2, how might these factors have changed the appraiser’s conclusions? Be specific.
4. Based on the 13% liquidity discount that was estimated by the business appraiser, what was the actual purchase price premium paid to Tayco shareholders for each of their common shares?

This discussion is a highly summarized version of how a business valuation firm evaluated the liquidity risk associated with Taylor Devices’ unregistered common stock, registered common shares, and a minority investment in a business that it was planning to sell following its merger with Tayco Development. The estimated liquidity discounts were used in a joint proxy statement submitted to the SEC by the two firms to justify the value of the offer the boards of Taylor Devices and Tayco Development had negotiated.