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member of the American Society of Appraisers, to which he has
never belonged. Since Mr. Shelton has not demonstrated that he
is qualified to perform a business valuation, we will evaluate
his opinion accordingly. See Anderson v. Commissioner, supra at
249.
Mr. Shelton used a capitalized earnings method to value the
FIC stock at the time of the 1980 Gifts. Using the capital asset
pricing model (CAPM), Mr. Shelton calculated a cost of equity and
then computed FIC's weighted average cost of capital (WACC).
Earnings before interest, depreciation, and taxes (EBIDT), a
variant of EBITDA (earnings before interest, taxes, depreciation,
and amortization), were then capitalized using the WACC to arrive
at a total enterprise value. In valuing the 1980 Gifts,
Mr. Shelton projected 12-month earnings from FIC's 10-month
income statement for FY 1979, which he then capitalized to arrive
at a February 1980 enterprise value. Mr. Shelton determined
August 1981 enterprise value by capitalizing FY 1980 EBIDT and
then adding 5 percent to reflect FIC's value in August 1981.
After determining that FIC had a beta of 1.0., Mr. Shelton
used the standard CAPM formula to arrive at a cost of equity of
18.44 percent. See description and discussion of beta infra pp.
28-30. Finding that Burger King was the number two fast food
chain, Mr. Shelton reasoned that Burger King would be no more or
less volatile than the fast food industry as a whole, justifying
a beta of 1.0 for FIC's common stock. In his report, Mr. Shelton
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