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of an expert's testimony and reject others. Helvering v.
National Grocery Co., 304 U.S. 282 (1938).
Petitioners' expert, Mr. Robert Conklin of Ernst &
Young, relied solely on the income approach in valuing
the SWI stock. Mr. Conklin did not use the market
comparison approach because he believed that there were
no sufficiently comparable companies in existence as of
the valuation date. He did not use the cost approach
because he felt it "tends to minimize the value of assets
and fails to consider intangibles such as goodwill."
Mr. Conklin utilized a "discounted cash flow
analysis" to calculate the fair market value of SWI
stock. Under this analysis, the value of stock is equal
to the present value of the cash flow the company is
expected to generate in the future. Mr. Conklin began
his analysis by estimating SWI's net income for the 10-
year period from 1990 to 1999, and what he described as a
"terminal year". He calculated this net income figure by
estimating the total sales SWI could expect to generate
from each store and multiplying by the number of stores
SWI could be expected to operate each year. Mr. Conklin
assumed that SWI would expand its operations rapidly from
1989 to 1994, and that it would open a constant number of
new stores each year thereafter until 1999, reaching a
total of 271 stores in that year. He also assumed that
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