Estate of Helen J. Smith, Deceased, Frederic L. Foill II and Cassandra F. Vallery, Co-Executors - Page 17




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          rate of 18 percent, which he reduced by 7 percent expected                  
          growth, resulting in a capitalization rate of 11 percent.8  To              
          compute his earnings-based value for JFI, he divided earnings of            
          $28,395 by the capitalization rate of .11 for a value of                    
          $258,133.  A one-third interest was therefore worth $86,044.                
               To compute a lack of marketability discount, Mr. Hitt                  
          started with the figure of 45 percent based on restricted stock             
          sales, as he did with the asset-based value calculation.  Here,             
          however, he did not increase the discount to 50 percent, as he              
          did in the case of the asset-based value.  In valuing JFI as a              
          going concern, he did not feel that he should take into account             
          transaction costs such as the cost of selling the assets.                   
          Applying the lack of marketability discount resulted in a value             
          of $47,324, or $243 per share.9                                             
                    Weighting the Values                                              
               Mr. Hitt believed that the greater part of the value of JFI            
          was due to the value of its earnings rather than the value of its           
          assets.  He gave 75 percent of the weight of the total value of             
          JFI to the earnings-based value of $564 per share, and 25 percent           
          to the asset-based value of $243 per share.  This resulted in a             
          value of $323 per share.                                                    

               8 Mr. Egan used a risk-free rate of 7.53 percent and a                 
          capitalization rate of 26 percent.                                          
               9 If Mr. Egan had applied his lack of marketability discount           
          before weighting the two values, as Mr. Hitt did, his earnings-             
          based value would have been $83 per share.                                  





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