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the weighted average of the unadjusted values was $10,196,000
(the weighted average unadjusted value).
HML then applied a lack of marketability discount of 25
percent to the weighted average unadjusted value. In arriving at
this percentage, HML considered several studies of typical
marketability discounts used for minority interests in privately
held entities. Based on its review of this empirical evidence,
HML concluded that a reasonable range for a lack of marketability
discount for closely held common stock was 25 percent to 45
percent.
HML then looked at the following factors to determine where
Deft's lack of marketability discount should fall within this
range: (1) The availability of public market; (2) the company's
recent financial performance; (3) the future outlook for the
company and industry; (4) the company's distribution policy; (5)
the restrictions on the transferability of the stock; (6) the
expected holding period of the stock; (7) the cost or expectation
of a public offering; (8) the number of existing shareholders;
(9) the size of the interest and the control inherent in the
interest; and (10) the potential environmental liabilities.
Based on HML's analysis of the foregoing factors, HML concluded
that Deft's lack of marketability discount should fall at the low
end of the range. HML stressed the importance of the size of the
interest being valued (which favored a lower discount) but noted
that there was considerable uncertainty surrounding Deft's
potential environmental liabilities (which favored a higher
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