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Answer: less than the initial DLOM.
When a private company expects to go public in the near future, the DLOM decreases because the shares will soon become more marketable. The anticipation of an IPO reduces the liquidity risk and marketability constraints, leading to a lower discount compared to the initial valuation when there was no clear exit strategy.
Author: LeetQuiz Editorial Team
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A private equity investor purchased a non-controlling interest in a private company several years ago. The valuation included a discount for lack of marketability (DLOM). If the firm expects to go public in the near future, its current DLOM is most likely:
A
less than the initial DLOM.
B
equal to the initial DLOM.
C
greater than the initial DLOM.
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