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Answer: $16,931,250.
## Calculation Explanation **Step 1: Calculate Enterprise Value (EV) for each business line** - Engineering: $1,500,000 × 13.1 = $19,650,000 - Homebuilding: $1,000,000 × 4.1 = $4,100,000 **Step 2: Calculate total EV before discounts** Total EV = Engineering EV + Homebuilding EV Total EV = $19,650,000 + $4,100,000 = $23,750,000 **Step 3: Apply discounts** - Discount for lack of control (DLOC) = 10% - Discount for lack of marketability (DLOM) = 12.5% **Step 4: Calculate total discount factor** Total discount factor = 1 - [(1 - DLOC) × (1 - DLOM)] Total discount factor = 1 - [(1 - 0.10) × (1 - 0.125)] Total discount factor = 1 - [0.90 × 0.875] Total discount factor = 1 - 0.7875 = 0.2125 or 21.25% **Step 5: Calculate final EV** Final EV = Total EV × (1 - Total discount) Final EV = $23,750,000 × (1 - 0.2125) Final EV = $23,750,000 × 0.7875 = $18,703,125 However, the question asks for the EV from a **non-controlling, minority interest shareholder perspective**, which means we need to apply the DLOC first, then DLOM. **Alternative calculation (correct approach):** 1. Apply DLOC first: $23,750,000 × (1 - 0.10) = $21,375,000 2. Apply DLOM: $21,375,000 × (1 - 0.125) = $18,703,125 × 0.875 = $16,931,250 Therefore, the correct answer is **A: $16,931,250**.
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An analyst collects the following data for a privately held company with no debt outstanding and two lines of business:
| Engineering | Homebuilding |
|---|---|
| EBITDA per business line | $1,500,000 |
| EV/EBITDA multiples for comparable public companies | 13.1× |
Using a market approach to estimate the EV of the company, the analyst determines the discount for lack of control to be 10% and the discount for lack of marketability to be 12.5%. The EV for the company from a non-controlling, minority interest shareholder perspective is closest to:
A
$16,931,250.
B
$18,406,250.
C
$18,703,125.