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Approach Indicated Value
Capitalization of 1989 earnings $1.87
Capitalization of revenues 1.75
Price/book value 1.48
Without explaining the weight to be given to each approach, other
than stating that the most weight should be given to 1989
earnings, less weight should be given to price/book value, and
the least value should be given to revenues, Klemm opined that
the publicly traded equivalent value of the shares on a per-share
basis, as of October 22, 1989, was $1.70
Klemm then applied two discounts to the $1.70 per-share
value. He first applied a 20-percent discount to reflect the
minority position that an owner of the shares would have. He
then applied a 25-percent discount to reflect the lack of an
established market for the shares.
Taking into account the two discounts that he had applied,
Klemm concluded that the fair market value of the shares, on a
minority interest basis, was $729,000, or $1.02 per share.
In his interview with Bernard V. Vonderschmitt, president of
the corporation, Klemm did not inquire as to whether, on
October 22, 1989, the corporation had any plans for a public
offering of stock. He did not consider the potential for a
public offering in valuing the shares.
Value of the Shares
The fair market value of the shares, on a per-share basis,
was $4.20 on October 22, 1989.
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