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A. Valuation by Petitioners’ Expert
Petitioners’ expert, Peter Gampel (Mr. Gampel), is the
director of the Florida and Caribbean valuation services group of
Arthur Andersen & Co. In determining the value of the shares of
WVI stock awarded to Dr. Gow (800 shares on February 16, 1989, and
400 shares on February 15, 1990), Mr. Gampel first valued WVI’s
one-third interest in Powhatan Associates, and then adjusted the
book values of WVI’s assets to their fair market values to
determine the equity value of WVI as of the applicable valuation
date. Next, Mr. Gampel applied discounts to the shares of stock
awarded to Dr. Gow to reflect lack of control and lack of
marketability. Mr. Gampel ultimately arrived at a value of
$685,000 for the 800 shares of WVI stock awarded to Dr. Gow on
February 16, 1989, and $299,000 for the 400 shares awarded to Dr.
Gow on February 15, 1990.
In valuing WVI’s interest in Powhatan Associates, Mr. Gampel
first determined the aggregate value of Powhatan Associates as of
February 16, 1989, and February 15, 1990, and in doing so he used
the income approach, adopting the discounted cash-flow method. The
discounted cash-flow method is based upon the premise that a
business is worth the present value of all future benefits it will
produce for its owner(s), with each expected future benefit
discounted at a rate that reflects the risk that those benefits
will not be realized. The discount rate selected is generally
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