Estate of James J. Renier, Deceased, Kent L. Renier and Dubuque Bank & Trust Company, Co-Executors - Page 19

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          reported net income is appropriate.                                         
                           b.  Adjustment for Income From Excess Working              
               Both experts agreed that Renier’s cash and short-term                  
          investments exceeded its working capital needs, that the excess             
          should be treated as a nonoperating asset, and consequently that            
          the interest earned by the excess should be subtracted from                 
          reported net income as a normalizing adjustment.  They disagreed,           
          however, on the size of Renier’s excess working capital and the             
          method of its calculation.                                                  
               Mr. Sliwoski concluded that Renier only required working               
          capital equal to 7 days of annual sales (7/365 of annual sales),            
          which resulted in estimated working capital needs during the base           
          period ranging from $24,417 for 1989 to $35,152 for the partial             
          year ending on the valuation date.  Consequently, Mr. Sliwoski              
          made a normalizing adjustment that subtracted all interest earned           
          by Renier during the base period and added back an estimated                
          amount of interest14 that would have been generated by the                  
          working capital he estimated was needed.                                    
               Mr. Kramer concluded that Renier required working capital              
          equal to 2 months of average operating expenses during the base             
          period, plus 1.5 times average monthly inventory purchases in               
          1994, or $259,205 on the valuation date, leaving $362,038 in                

               14 Mr. Sliwoski computed interest for this purpose at a rate           
          of 5 percent.  To avoid “unwarranted controversy”, Mr. Kramer               
          adopted the same rate for purposes of his computations.                     

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