Accredited Business Valuation (ABV) Practice Test

The average discount indicated for restricted or non-marketable shares typically falls within the range of 25% to 35%. This discount reflects the decreased liquidity and marketability associated with these types of shares, as they cannot be easily sold or traded on public exchanges like readily marketable securities.

Investors often require a discount to compensate for the inability to quickly convert these shares into cash, the risks inherent in holding restricted shares, and the potential for price volatility once they do become marketable.

In valuing restricted shares, professionals will consider factors such as the length of the restriction, the company’s overall financial health, and market conditions, which can influence the extent of this discount. This range aligns with industry standards and is supported by empirical studies, making it a widely accepted figure in the field of business valuation.