Resale restriction and corresponding penalty

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Company A purchased 10,000 shares of Apple common stock from Company B, which is an entity unrelated to Apple. The terms of the purchase agreement state that Company A agrees not to sell the shares for 10 months after closing. Should Company A sell the shares before the lock-up period expires, it will be liable to Company B for the liquidated damages of $100,000 stipulated in the agreement. If the Apple shares traded on the NYSE close at $150/share on the measurement date, what is the fair value of the Apple stock?

$1,500,000, less $100,000 for the liquidated damages.

$1,500,000, less an adjustment for the restriction based on what a market participant would demand due to the 10-month resale restriction and corresponding penalty.

$1,500,000 - based on the closing NYSE price.

Reference no: EM133239443

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