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stated 10 years later that little credibility was given to those
projections in 1989.
Button projected expenses, including materials, labor,
overhead, royalty, depreciation, taxes, capital expenditures, and
depreciation, based on historical ratios from January 1987 to
June 1989. He also took into consideration change in working
capital in arriving at the cash-flow estimates. The cash-flow
estimates for the building materials and automotive divisions
were ultimately combined. He calculated terminal value using the
24.75-percent discount rate and a growth rate of 6.9 percent. He
concluded that the terminal value of Schlegel UK was $33.554
million.
Applying the 24.75-percent discount rate to the projected
cash-flows and terminal value of the Schlegel UK automotive and
building products divisions, Button concluded that the
controlling interest value of Schlegel UK was $19 million;
however, Button also was of the opinion that a discount for lack
of marketability was necessary because the DCF method calculates
the value of a publicly traded company. Thus, Button applied a
16.3-percent lack-of-marketability discount to value Schlegel UK
as a privately held company, concluding that the fair market
value was $16 million.
Button also used the market multiple approach to value
Schlegel UK; however, he relied only on the price/earnings and
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