Question
1- Based on its growth prospects, a private investor values a local bakery at $850,000. She believes that costsavings having a present value of $40,000
1- Based on its growth prospects, a private investor values a local bakery at $850,000. She believes that costsavings having a present value of $40,000 can be achieved by changing staffing levels and store hours. Based on recent empirical studies, she believes the appropriate liquidity discount is 25 percent. A recent transaction in the same city required the buyer to pay a 6 percent premium to the asking price to gain acontrolling interest in a similar business. What is the most she should be willing to pay for a 50.1
percent stake in the bakery?
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