Overview of Business Valuation Discounts and Premiums and the Bases to Which They Are Applied
This chapter is from the Second Edition of Shannon Pratt's Business Valuation Discounts and Premiums, published in 2009 by John Wiley & Sons. The chapter provides a broad overview of the high degree of significance of the topic of discounts and premiums in business valuation. In fact, the existence and/or amount of discount or premium is often the largest money issue in disputed business valuations. The chapter distinguishes between those discounts and premiums that affect the whole enterprise and all its owners, called entity-level discounts, and those that are specifically a result of ownership characteristics (control and marketability or lack of either), called shareholder-level discounts and premiums. It also introduces level-of-value charts, and shows how the standard of value (for instance, fair market value, fair value, or investment value) has an effect on whether premiums or discounts apply in specific cases.