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b. Respondent’s Experts’ Estimate of the Value of Kosman,
Inc.'s Western National Bank Stock
Respondent’s experts used two income methods and a market
method to value Kosman Inc.'s Western National Bank stock based
on the value of the bank's projected income. The income methods
they used are a discounted cash-flow method and a capitalization
of earnings method.
Using the income methods, respondent's experts estimated the
present value of Western National Bank's projected after tax
earnings over 5 years. They used a discount rate of 15 percent.
They believed an investment in Western National Bank was
comparable to an investment in "Standard & Poor’s 500 small
capitalized companies”. Under the income methods respondent's
experts concluded that a 100-percent stock interest in Western
National Bank was worth $2 million.
Under the market method, respondent's experts chose as
comparables six banks, five of which were in agricultural areas.
Each of the six banks was acquired in a private transaction.
Three of the six banks were in Kansas, two were in Nebraska, and
one was in North Dakota. Using a market method, respondent's
experts concluded that a 100-percent stock interest in Western
National Bank was worth $2.35 million.
As discussed above, respondent's experts concluded that a
100-percent stock interest in Western National Bank was worth $2
million under an income method. They concluded that the fair
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