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Mr. McGraw holds a degree in chemistry from Johns Hopkins
University and an M.B.A. from Harvard.
The CFC report concluded that the fair market value of 56.7
percent of PCAB’s stock as of May 1, 1987, was $2,691,458. This
conclusion is based on the whole enterprise value of PCAB being
$6,329,120 and applying a discount of 25 percent for lack of
marketability of the 56.7-percent block of stock being valued.
CFC used a capitalization of cash-flows as the primary valuation
measure.
CFC also performed a reasonableness test using a guideline
(comparative) company approach. Their report states: “This
approach, however, was not used as a primary measure due to the
fact that there were no public companies comparable enough to use
as reliable indicators of value for a small, atypical Pepsi
bottler like PCAB.” CFC also did not use a discounted cash-flow
approach “because of difficulties in forecasting future revenues
and earnings, given significant changes in margins and earnings
in the years preceding the Valuation Date.”
CFC also rejected the use of multiples based on the then-
current sales of other franchises or dollar-per-case valuations.
CFC cited PCAB’s small size and heavy reliance on purchasing
products from other suppliers (about 75 percent of sales) as
reasons to consider PCAB as atypical from other bottlers.
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