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lack of marketability discount to be applied in valuing a G&J
share, and (3) G&J’s cost of equity.
We shall describe their testimony with respect to their
areas of disagreement.
B. Mr. McCoy’s Testimony
1. Introduction
Mr. McCoy stated that his assignment was “to determine the
fair market value of small minority interests in the common stock
of G&J”. Mr. McCoy used three separate methods to determine that
value: market price comparison method, discounted future free
cash-flow method, and valuation by capitalization of earnings.
Mr. McCoy gave equal weight to the results reached under the
second and third methods, but only one-third of that weight to
the result reached under the first method. Mr. McCoy determined
a weighted average value for a G&J share and, then, applied a
discount for lack of marketability to arrive at the
aforementioned value for a G&J share of $5,680.
2. Tax Affecting G&J’s Earnings
Under the discounted future free cash-flow method, Mr. McCoy
considered G&J to be an asset capable of producing cash-flows to
its owners for an infinite number of periods. He determined the
present value of G&J by, first, hypothesizing the available cash
for each such period, second, discounting each such amount to
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