- 57 -
Mr. Chaffe concluded under the market approach that the
marketable, minority value as of the valuation date of the common
stock of Marrero Land as voting stock was $18 million using the
REIT models and $17 million using the REOC models.
Under the income approach, Mr. Chaffe essentially used a
discounted cash flow model under which current expected cash flow
was used as a basis for determining the fair market value of the
common stock of Marrero Land on the valuation date. The dis-
counted cash flow model that Mr. Chaffe used was based on cash
flow available to a minority shareholder. According to Mr.
Chaffe,
A discounted cash flow ("DCF") model is a method used
to determine the minority equity price of a Company by
a discount or present value method applied to the
future cash flow of the Company available to the mi-
nority shareholder through dividends or growth from
retained earnings. In such a DCF model, the investor
receives the free cash flow, which is the cash gen-
erated by the Company that is available to pay div-
idends or be reinvested to produce future profits. The
future stream of annual cash flow and the terminal or
residual value must be discounted to arrive at the
present value.
In applying the discounted cash flow model, Mr. Chaffe
assumed that cash flow is the amount of money available to
benefit minority shareholders. Based on historical cash flows of
Marrero Land, the outlook for the Company and for the industry,
and discussions with the Company's management, Mr. Chaffe de-
termined that $1,409,676 was the appropriate level of free cash
Page: Previous 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 NextLast modified: May 25, 2011