-48-
The cruzado proceeds would remain subject to the same prohibition
on repatriation, until April 14, 1999.
F. Petitioner's Tax and Accounting Treatment of the Conversion
NBM's chief financial officer and comptroller, Phil Williams,
reviewed and analyzed the Corporate Finance study. Two days after
the conversion he concluded that the estimated fair market value of
petitioner's 14.361-percent equity interest in PCC was between
$12.4 million and $12.6 million. Mr. Williams arrived at this
conclusion by using the price/equity ratio and discounted cash-flow
approaches, as well as adding a third approach, based on the net
book value of PCC. He then weighted the three approaches equally.31
Mr. Williams recommended that the investment be recorded at par.
In April 1987, Mr. Narayana (who was in charge of petitioner's
Brazilian blocked deposits) agreed with Mr. Williams' conclusion.
31 Mr. Williams determined the fair market value of
petitioner's interest in PCC as follows (numbers are in
thousands):
Method Total Company Norwest's Share
Price/earnings ratio $ 79,385 x 14.361% = $11,400
Discounted cash-flow 79,790 x 14.361% = 11,459
Net book value 1100,386 x 14.361% = 14,416
Weighted average $ 86,520 $12,425
1 Discounted 20 percent.
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