- 35 -
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.
Page: Previous 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 NextLast modified: May 25, 2011