Nathan P. and Geraldine V. Morton - Page 31

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             fluctuated between 1.7 percent and 7.58 percent during                   
             the 4-year period from 1986 to 1989.  Our computation of                 
             those percentages is as follows:                                         

             In Thousands           1985    1986   1987     1988   1989               
                                                                                     
             Total sales            $3,000 $11,739 $32,124$66,566 $137,458            
             Change from previous year--     8,739   20,385 34,442   70,892             
             Working capital        --        211  347   1,777    5,376               
             Incremental working capital   --2.41%   1.70%  5.16%    7.58%              

                  The discount rate employed in Mr. Conklin's valua-                  
             tion model is also bothersome.  Mr. Conklin testified that               
             he chose a discount rate of 35 percent to reflect the rate               
             of return required by venture capitalists before devoting                
             money to a particular enterprise.  Mr. Conklin testified                 
             that venture capitalists generally require between 30- and               
             60-percent return, and that his 35-percent discount rate                 
             was "conservative".  However, Mr. Conklin did not provide                
             any objective support, either at trial or in his expert                  
             report, for selecting a discount rate in this range.                     
             Moreover, the discount rate is another extremely                         
             problematic variable in Mr. Conklin's model.  Changing the               
             discount rate just 2 percentage points, from 35 to 33                    
             percent, leaving all other variables the same and applying               
             a 7-percent growth rate, causes an increase in the overall               
             valuation from, by our calculation, $47.33 per share to                  
             $1,161 per share.  A discount rate of 30 percent produces                
             a final value of $3,551 per share.  Once again, the                      





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