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C. Minority Discount
Klemm applied a 20-percent discount to reflect what he
believed would be the minority position that a purchaser of the
shares would have. We think that that is inappropriate. Klemm
did not arrive at a value for the corporation and then try to
determine the value of minority interest. He arrived at a market
equivalent value for a share of the corporation and then
multiplied to arrive at the value of the shares. We assume that,
in valuing a single share of stock, the market would recognize
the minority position of that share, and that no further minority
discount would (or could) be demanded.
V. Spiro’s Testimony
A. Analysis
We will summarize our reasons for agreeing with respondent’s
valuation of the shares.
We found Spiro’s use of the income and market approaches to
be straightforward and reasonable. With respect to his use of
the income approach, we agree with his adjustments to income and
his use of a 5-year projection. We do not think that he
overestimated either base revenues, expected revenue growth, or
the other factors and adjustments going into the calculations of
expected cash-flows. We are satisfied with his choice of a
discount rate of 23.3 percent as appropriate for the corporation.
We agree with his calculation of the present value of the 5-year
expected cash-flows. We agree with the necessity to add to that
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