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$5.2 million for IHC. Respondent’s expert testified that a
material difference in the results produced by the market
comparable and discounted cash-flow approaches--which he defined
as a difference of approximately 25 to 30 percent--would suggest
that there was something “inherently wrong” that would cause him
to review his assumptions. The difference between the values
indicated by the discounted cash-flow approach (as herein
adjusted) and the market comparable approach is $1.4 million, or
approximately 39 percent. Respondent’s expert further testified
that as between the two valuation methods he used, the discounted
cash-flow analysis was “more significant” than market
comparables, based on his personal experience and his review of
industry literature. In addition, we note that respondent’s
expert’s use of the market comparable approach required him to
make numerous adjustments to the ratios derived from the publicly
traded comparables, in an effort to account for the substantially
smaller size of IHC and certain Generally Accepted Accounting
Principles applied to the financial reports of public companies.
These adjustments appeared, in the end, somewhat arbitrary; in
any event, respondent’s expert conceded that they were based on
his subjective determinations. In the Court’s view, the
adjustments necessitated by the size difference between IHC and
the publicly traded comparables render the market comparable
approach inherently more prone to error. On the basis of these
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