--%>
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 : Assessing market expectations using CAPM

    Assume that the risk-free rate is 1% and the expected market return is 9%. You are considering purchasing Super Soft stock, which currently sells for $100 a share and will pay its next (annual) dividend of $1.00 exactly one year from today. Super Soft is considered to

    		•
  • Q : Low-discrepancy sequence or quasi

    Who proposed definition and development of low-discrepancy sequence theory or quasi random number theory?

    		•
  • 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 : Explain new methodology of standard

    Explain new methodology of standard market practice.

    		•
  • Q : Market for Corporate Bonds Write some

    Write some point regarding Market for Corporate Bonds.

    		•
  • Q : Long-Term Debt What are Long-Term Debt

    What are Long-Term Debt and what are their main parts.

    		•
  • Q : NPV and Other Investment Criteria The

    The XYZ Manufacturing Company is considering the below investment proposal. The initial investment is $100,000. It was an expected economic life of 10 years. The net cash flow in the initial year is expected to be $25,000 and annual net cash flow is expected to develo

    		•
  • Q : What is Regular meeting of day-to-day

    Regular meeting of day-to-day commitments: The estimation of WCR also helps to ensure that there is positive WC existence. This proves helpful in meeting requirements which are regular in nature such as payments of salaries, wages, rental charges etc.

    		•
  • Q : DCF Analysis AB Corp. is in the

    AB Corp. is in the business of making white-board markers. They are computing the potential of investing in some new equipment that will enhance their manufacturing process.  The initial cost of the latest machinery is $470,000 plus a one-time installation cost o

    		•
  • Q : Finance A middle income worker, with a

    A middle income worker, with a dependent spouse older than the normal retirement age, retired in January 2004. In the year prior to retirement, her gross monthly earnings were $1,500. Her Social Security pension benefit is $1,000 per month. Prior to retirement, she was subject to total taxes on her

    		•