- 36 -
above that it was foreseeable on September 18, 1992, that
Sterling would redeem the Sterling preferred stock on or before
December 31, 1995, at or about the price stated in the purchase
agreement. We conclude similarly that a hypothetical willing
buyer would have bought (and a hypothetical willing seller
would have sold) the decedent's Sterling preferred stock on
September 18, 1992, at a price that approximated the present
value of the amounts that a holder of the decedent's Sterling
preferred stock would have received for the mandatory
redemptions. On each December 31 of 1993 through 1995, Sterling
was obligated to redeem approximately 511.161 shares of Sterling
preferred stock from the decedent (or a successor holder).
Taking into account the fact that dividends accrued daily under
the purchase agreement at the rates which were set forth therein,
we find that Sterling was obligated to pay the following amounts
for the redeemed shares on the respective dates: $871,023,
$986,978, and $1,118,368.9 Applying a reasonable discount rate
of 4 percent to each amount to ascertain its present value on
September 18, 1992, we find that these payments were worth
$827,298, $900,676, and $980,562 on that date. We conclude that
9 We find these amounts by using well-established present
value formulae. For purposes of our computation, we assume that
the Sterling preferred stock was issued on Mar. 15, 1989.
Although the record discloses that Sterling issued the Sterling
preferred stock in Mar. 1989, the record does not reference a
specific date.
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