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Spiro applied a liquidity discount to the indicated value.
To determine the size of the discount, Spiro relied on the same
studies and opinions that he relied upon in determining the size
of the discount to apply to the Savings stock. He also
considered the particular facts and circumstances of the Willits
stock, including the level of Willits' public recognition in the
local community, its history of paying increasing dividends, the
lack of restrictions on trading the shares, the existing market
for the stock, and the stock's trading history. Spiro concluded
that a liquidity discount of 20 percent was appropriate, and that
the fair market value of the stock was $755 per share.
Spiro used his piecemeal sales method to estimate the
present value of the Willits shares in the same way that he used
it to estimate the value of the Savings shares, except he assumed
that 125 Willits shares could be sold each year for the next 4
years at a price approximating their book value at the time of
sale. Using this method, Spiro concluded that the implied price
per share was $816.
To value the shares by the income method, Spiro capitalized
Willits' pro forma cash-flow. To calculate the pro forma cash-
flow, Spiro made certain assumptions regarding Willits' 1992 net
income, provision for loan losses, other operating income and
expenses, income taxes, and additions to equity capital. He
developed the discount rate to calculate the present value of the
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