Why is valuation discount are applied sequentially and are not added

CFA Level II Equities
#1

Hi All,

What is the intution behind the below formula and why valuation discount are applied sequentially and are not added

Total discount formula for both control and marketability is 1- (1-DLOC)*(1-DLOM)

#2

Additive is an approximation to multiplicative:

1- (1-DLOC)*(1-DLOM)
=1 - [1 - DLOM - DLOC + DLOM * DLOC]
=DLOM + DLOC - DLOM * DLOC

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#3

@breadmaker Thanks a lot buddy :relaxed:

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