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the corporation. He then averaged the appropriate market values
to derive a value for a share of the corporation of $5.41. As
with the income approach, Spiro applied a liquidity discount of
10 percent to arrive at a per-share value of $4.87 under the
market approach.
Spiro then reconciled the values he had reached under the
income and market approaches by assigning weights to the results
reached under each. Because of the difficulty associated with
forecasting the financial performance of startup, high growth
companies, Spiro accorded greater weight to the result reached
under the market value approach. He gave the market value
approach a 70-percent weight and gave the income approach a
30-percent weight. Using that approach, he concluded that the
aggregate fair market value of the shares was $3,530,575, or
$4.94 a share.
Spiro erred in calculating the value of the shares under the
income approach. He erred in calculating the future value of the
corporation after 5 years. Correcting that error results in a
value per share under the income method of $2.63 and a weighted
average fair market value of $4.20 per share, or $3,004,399 for
all the shares.
Petitioner’s Expert
Petitioner presented as its expert witness David L. Klemm
(Klemm), who was accepted by respondent as an expert and whose
written report was received in evidence as his direct testimony.
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