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the sales forecasts. He then reduced EBDIT by a 1.3-percent
corporate overhead expense, the depreciation, and the capital
expenditures from the E&Y report. He also adjusted for the
corporate tax rate.
Shapiro calculated terminal value using a projected growth
rate in cash-flows of 6 percent, while also taking into
consideration expected inflation of approximately 4 percent and
economic growth of about 2 percent. He arrived at a terminal
value of $88.26 million.
Applying the discount rate from his original report and his
rebuttal report to his cash-flow projections and terminal value,
Shapiro concluded that the fair market value of Schlegel UK under
the DCF method on the valuation date was $52.2 million and
$49.8 million, respectively.
As a “sanity check”, Shapiro also valued Schlegel UK using
several market multiple methods. First, Shapiro selected seven
companies that manufactured rubber products for automobiles and
buildings and were involved in acquisitions in similar industries
around the same time as the sale of Schlegel UK. Shapiro then
calculated market multiples from the available data of
purportedly comparable companies and applied those multiples to
the financial data of Schlegel UK, arriving at the following fair
market values:
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