Estate of Mary D. Maggos - Page 35

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          working capital of $753,620,23 well in excess of the $665,815               
          shown on the 1986 balance sheet.                                            
               BVS determined from PCAB’s records that PCAB held notes from           
          Nikita Maggos in the approximate amount of $1,328,110.24  A                 
          hypothetical purchaser of 56.7 percent of the shares of PCAB from           
          a hypothetical seller would have relied on PCAB’s financial                 
          statements to determine PCAB’s assets.  Neither a hypothetical              
          purchaser nor a seller would have any reason to cause PCAB to               
          discharge Nikita Maggos’ debt.  A hypothetical purchaser of 56.7            
          percent of the shares of PCAB would have been in control and                
          would have logically insisted on repayment of Nikita Maggos’                
          notes.  In the instant case, we think the appropriate treatment             
          of the shareholder notes, for valuation purposes, is to treat               
          them consistently with the business records of PCAB as                      
          nonoperating assets.                                                        
               BVS’ discounted cash-flow analysis, after making the                   
          adjustments detailed above, would result in a value for 100                 

               23“Working capital” in this context is defined as the sum of           
          cash on hand, receivables, inventory, and other current assets              
          less accounts payable and other current liabilities.                        
               24This number is derived by averaging the notes outstanding            
          on Oct. 31, 1986 ($1,054,138), and the notes outstanding on Oct.            
          31, 1987 ($1,602,082).  The “Current Market Indicator                       
          Evaluation”, which was prepared by Shircliff contemporaneously              
          with the redemption transaction, shows notes receivable from                
          stockholders as being approximately $1,300,000.  We note that               
          Coopers & Lybrand, petitioner’s expert in the District Court                
          litigation, valued the notes at $1,054,138 in its report.                   

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