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an assignee interest in MIL39 as compared to the limited impaired
marketability of restricted shares of stock. His rejection is
based primarily on his opinion, supported by the economic
analysis of others,40 that the level of discount does not
continue to increase with the time period of impaired
marketability, because investors with long-term horizons would
provide a natural clientele for holding illiquid assets and would
compete to purchase all or a portion of the gifted interest.
d. Application to MIL
Dr. Bajaj concludes:
Considering the available data, the Partnership’s
holdings and history, and the marketability discount of
7.23% suggested by my regression analysis involving a
broad range of economic sectors, I conclude that a
marketability discount of 7% [rounded from 7.23
percent] is appropriate for all the assets held by MIL
when valuing the subject interest. * * *
5. Determination of the Marketability Discount
a. Discussion
Mr. Frazier, in his testimony in rebuttal to Dr. Bajaj,
criticizes Dr. Bajaj for focusing narrowly on “liquidity” at the
expense of other factors that contribute to a lack of
marketability. Mr. Frazier states that “[t]he impediments to
value associated with inability to easily sell an interest in a
39 Both experts operate under the assumption that there
will not be a ready market for assignee interests in family
limited partnerships during the remainder of MIL’s 30-year term.
40 Amihud & Mendelson, “Asset Pricing and Bid-Ask Spread,”
17 J. Fin. Econ. 223 (1986).
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