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Standard & Poor’s Stock Reports. Ignoring those P/E ratios over
25 and those not calculable due to losses or zero profits (which
eliminated eight companies and truncated the range for one),
petitioner’s expert determined that the median of the midpoints
of the companies’ 1992 ranges of P/E ratios was a P/E ratio of
14.25. Petitioner’s expert then considered the following factors
and made adjustments of unspecified quantities in the directions
indicated below for an end result of a pretax P/E ratio in the
range of 3 to 5:
Factor Adjustment
Market diversification Down
Product diversification None
Management depth Down
Future earnings prospect None
Financial strength None
Access to capital markets Down
Marketability Down
Control Up
Net effect Down
Petitioner’s expert also calculated a capitalization rate
using the buildup approach as follows:
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Last modified: May 25, 2011