DLOC = 1 - [1 / (1 + Control premium)]
Hi!
Can anyone plz explain working of this formula…???
You’re taking the inverse of the control premium. In private company valuation, you can project cash flows on a control or minority interest basis. If you project on a control basis, you have to remove the implicit control premium to get to a noncontrolling interest.
So you take the - say, 15% - control premium (based on market data for the value investors place on control of similar companies) and find the inverse.
= 1 - (1/(1.15)) = 13%
Thanx! a lot
