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Fertilizer Division with those of the four comparable companies,
Mr. Much concluded that, taken as a whole, the Fertilizer Division
operations "represent a similar investment risk, for a given
return", as the public fertilizer comparables as a group. Applying
his TIC/EBIT and TIC/EBITDA multiples, he determined the TIC value
of J.R. Simplot Co.'s Fertilizer Division as $574,270,000 (using a
market capitalization approach).
Following his comparative companies analysis, Mr. Much turned
to a DCF analysis to value J.R. Simplot Co.: (1) Determination of
the appropriate cash-flows to discount, based upon J.R. Simplot
Co.'s projected income statements and balance sheets; (2) selection
of a discount rate for J.R. Simplot Co. projections, based upon an
analysis of alternative investments (including public company
discount rates); (3) determination of a terminal value for J.R.
Simplot Co., as of the end of the last period for which projections
were available; and (4) determination of TIC value for J.R. Simplot
Co.
In determining the free cash-flows, Mr. Much concluded that
J.R. Simplot Co. had a revenue growth rate of 8.5 percent and an
EBIT margin of 4.5 percent based on historical performance. He
then applied a 10- to 12-percent discount rate, concluding that the
TIC value of the Food Division was between $481,100,000 and
$575,880,000, or $522,780,000 using an 11-percent discount rate.
In a similar manner, Mr. Much determined a 7.5- to 9.5-percent
discount rate with regard to the Fertilizer Division. He concluded
that using the discounted cash-flow approach, the TIC value of the
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