- 40 -
concluded that the fair market value of CamVic using the cost
approach was $948,000 or $6,925 per share as of May 31, 1975, and
$2,248,400 or $16,424 per share as of April 30, 1981.29 Applying the
income approach and, in particular, the discounted debt-free cash-
flow method, Mr. Kimmel concluded that CamVic's fair market value
was $1,388,100 or $10,140 per share as of May 31, 1975, and
$1,615,000 or $11,797 per share as of April 30, 1981. In
reconciling these differences, Mr. Kimmel, in his report, accorded a
"majority of the weight" to the income approach and "minimal weight"
to the cost approach. In his report, Mr. Kimmel ultimately
concluded that CamVic's fair market value was $1.3 million or $9,496
per share as of May 31, 1975, and $1.8 million or $13,148 per share
as of April 30, 1981.
For the reasons set forth below, we find that neither
petitioners nor their expert have demonstrated that the fixed price
per share as set out in the Buy-Sell Agreement reflected adequate
28(...continued)
value. In his report, Mr. Kimmel stated that no comparables were
found which were reflective of the business in which CamVic and
CamRon were engaged and two businesses were found comparable to
Ferguson.
29The disagreement between the parties' experts with respect
to value pursuant to the cost approach is due to their
differences over the fair market value of the underlying
corporate assets. While there are relatively small differences
over the amount of corporate liabilities, the differences with
respect to corporate liabilities would have little impact on the
value of the corporate stock.
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