Is there any logic of applying the discounts for Minority interest and marketability in the order given? The book doesnt explain why they reduced the 50 m$ by 20% first and then reduced by 25% next.
The answer could be different if we apply the discounting the other way round… Of course I am going to remember it is that way, but would like to know the logic if possible.
Thanks friends.
It would be the same.
"Marketable controlling interest value: (10% × 500) = 50. Minority interest discount: (20% × 50) = –10. Marketable minority interest: (50 – 10) = 40. Marketability discount: (25% × 40) = –10. Nonmarketable minority interest: (40 – 10) = 30. Smith’s investment banker values the investment at £30 " Apply 25% first - 50 - 50*25% = 37.5; apply 20% next - 37.5 - 37.5*20% =30. (1-x)(1-y) = (1-y)(1-x).
Haa, 1recho thanks mate… I am banging my head now 
Thanks for explaining…