- 34 - Powhatan Associates’ anticipated income stream;5 (2) the size of the discount rate (32 percent) he developed through the summation method; and (3) his application of a 15-percent contingency discount to reduce the adjusted book values of WVI as of the valuation dates. We conclude that these errors resulted in an unacceptable understatement of fair market value for the stock bonuses awarded to Dr. Gow.6 We agree with the valuation methodology used by Ms. Maiden and Ms. Kalmar (respondent’s experts) but disagree with the quantum of the discounts they determined for lack of control and lack of 5 Mr. Gampel determined Powhatan Associates’ anticipated income stream by (1) projecting the number of intervals sold, and (2) estimating the sale price for those units. He projected the number of intervals sold by averaging the interval sales for the 2-year period preceding each valuation date. He then divided total sales by intervals sold for each of 1987, 1988, and 1989 in order to arrive at the average interval price for the applicable valuation date. By using this methodology, he used $12,250 as the average interval sale price for the 1987-88 period and $13,200 for the 1988-89 period. We believe Mr. Gampel’s methodology to be flawed. The yearly interval sale price was trending upward, and by 1989 it was $13,300. The interval sale price used by Mr. Gampel for the 1989 and 1990 valuation dates was clearly understated, which in turn, resulted in the understatement of Powhatan Associates’ income stream. 6 We are mindful that besides the value of Powhatan Associates, there are other differences between the experts in valuing WVI, such as Mr. Gampel’s reducing to 90 percent of face Mr. Henderson’s note to WVI, whereas Ms. Maiden and Ms. Kalmar did not. Additionally, Mr. Gampel increased WVI’s adjusted book value to include WVI’s estimated earnings from the close of the end of the prior year to each of the respective valuation dates. We have chosen to disregard these differences but note that they would result in an overall increase in the value of WVI’s stock.Page: Previous 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 Next
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