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such probability and the corporate tax rate in an effort to
quantify that potential loss. We do not, however, think it is
reasonable to tax affect an S corporation's projected earnings
with an undiscounted corporate tax rate without facts or
circumstances sufficient to establish the likelihood that the
election would be lost.
Finally, Mr. McCoy argues that S corporations have a great
disadvantage in raising capital due to the restrictions of
ownership necessary to qualify for the S corporation election.
This concern is more appropriately addressed in determining an
appropriate cost of capital. In any event, it is not a
justification for tax affecting an S corporation's projected
earnings under a discounted cash-flow approach. Mr. McCoy has
failed to put forward any cognizable argument justifying the
merits of tax affecting G&J's projected earnings under a
discounted cash-flow approach.
D. Mr. Wilhoite’s Testimony
Mr. Wilhoite was asked to address whether, as of the
valuation date, it was reasonable for Dr. Bajaj to value a G&J
share, using the discounted cash-flow method, while assuming a
zero-percent corporate tax rate. Mr. Wilhoite faults Dr. Bajaj
for not taking into account the “known payment” of taxes in
arriving at a value for the G&J shares. It is unclear, however,
whether the “known payment” that Mr. Wilhoite has in mind is the
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