--%>
Assignment Help - homework help

Explain investment of bank for illiquidity premium

When my company is not listed, therefore the investment banks apply an illiquidity premium. In fact, they say this is an illiquidity premium but then they call this a small cap premium. Only one of the banks, apparently based upon Titman y Martin (2007), that added the given small cap premiums as: “0.91 percent if the capitalization is situated among $1,167 and $4,794 million; 1.70 percent if the capitalization is among $331 and $1,167 million; 4.01% if this is lower than $331 million”. The other bank adds 2% since historically the return of small companies was smaller than those big companies. Which one is more suitable?

E

Expert

Verified

It is clear that the size is not always a source of risk: here, in all sectors, small companies along with lower risks than bigger ones. Conversely, it does not seem that illiquidity influences the value when the shares of an unlisted company have a buyer, either because this is stated in the bylaws of the company, or since a shareholder wants to convert his/her debt in shares…

   Related Questions in Corporate Finance

  • Q : Weighted return and simple return to

    What is the difference between weighted return and simple return to shareholders?

    		•
  • Q : Road King Trucks Project I want to know

    I want to know how much do you charge for doing the project?

    		•
  • Q : Problem on arbitrage opportunity John

    John Chan considers purchasing a six-month stock futures contract on the shares of Li & Fung Limited. Shares of Li & Fung Limited are now presently trading at $50 per share and it is predicted that Li & Fung Limited will pay a dividend of $1 per share in o

    		•
  • Q : Zurich Pvt Ltd. You have joined Zurich

    You have joined Zurich Pvt. Ltd as a Finance manager. You are given the following information: Zurich Pvt Ltd. is a diversified manufacturing firm dealing with electrical appliances. In 2012, the firm reported an operating income of Rs. 857.60 million and faced a tax rate of 35% on income. The firm

    		•
  • Q : Types of agency Types of agency :

    Types of agency: Specific types of Agency include:A) Auctioneers: Are an agent of vendor until the fall of the hammer when they become an agent for the purchaser.B)

    Q : Widgets You are required to submit a

    You are required to submit a bid to supply 200,000,000 widgets per year to the State of Illinois for the next five years. Your company has an idle tract of real estate that cost $1,500,000 ten years ago; if your company sold the land today, it would generate $3,000,000 after the taxes were paid. The

    		•
  • Q : Who were the creators of uncertain

    Who were the creators of uncertain volatility model?

    		•
  • Q : Explain realization of name valuation

    I suppose that a valuation consciously realized in my name tells me how much I have to offer for the company, am I right?

    		•
  • Q : What repercussions do variations in

    What repercussions do variations in the oil price have on the value of a company?

    		•
  • Q : Explain Straddle and Strangle Straddle

    Straddle & Strangle: In the case of shorting butterfly spread, it can be seen that the gains are limited. However, there exists another strategy known as straddle which produces unlimited gains. This strategy benefits when the trader expects that

    		•