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please Use your keyboard (Don't use handwriting) Thank you.. I need new and unique answers, please....

please Use your keyboard (Don't use handwriting) Thank you..

I need new and unique answers, please. (Use your own words, don't copy and paste)

What is the marketability premium? Why should an issuing firm consider paying this premium?

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Answer #1

Normally what happens is that the company initially invest into machinery and production of the product starts after year and so. when company is venturing in the product, sales of which is uncertain in the market, than company shall add that risk premium(non marketability of the product) to the cost of capital while discounting it's cash flows

In simple terms marketability premium is the premium added for the risk that product might not get sold in future. Thus it is premium for uncertainity about marketability of company's product. If uncertaininty about demand of product is there than uncertainity regarding cash flow will also arise. To factor this uncertainity Marketability premium shall be added to cost of capital.

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