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ability of that model to deal with longer holding period option
values.
Kimball admitted at trial that his synthetic put option
analysis was flawed. In his report, he concluded that the price
of FOH shares should be valued in a range of $3.545 to $5.166 per
share. However, cross-examination of Kimball indicated several
mathematical errors in his calculations of the Black-Scholes and
Noreen-Wolfson models that are intended to estimate the expense
necessary to enter into put options. Respondent also pointed out
that there was an alternative calculation of the Shelton model.
After the adjustments, the new range in price for FOH shares
using the put option methodology was between $5.689 and $5.9372,
indicating a discount range of between 14.4 and 18 percent.
Second, Kimball analyzed the secondary offering approach to
valuation. As part of his research, Kimball reviewed various
studies that were performed to analyze the costs of a secondary
offering and similar transactions. Using this approach, Kimball
concluded that the fair market value for the subject FOH shares
was between $5.286 and $5.037 per share. He noted that the risks
of an unsuccessful secondary offering factored into his
determination of where, within this range, FOH shares would be
priced. He selected a fair market value of $5.10 per share, a
discount of about 26.5 percent, as the appropriate value under
this approach.
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