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excess working capital on that date. To account for the interest
generated by this excess working capital, Mr. Kramer took the
excess working capital amount on the valuation date, multiplied
it by 5 percent,15 divided the result by 12 (to get a monthly
figure) and then multiplied that amount by 69.33 months. The
result was then subtracted from reported net income as a
normalizing adjustment. Using this formula, Renier’s excess
working capital generated $104,584 in interest over the base
period.16
As to which expert’s methodology best adjusts for excess
working capital, we believe that Mr. Sliwoski’s formula
substantially underestimates Renier’s working capital needs. For
example, for the year ended June 30, 1989, Mr. Sliwoski estimated
Renier would require working capital of just $24,417. However,
Renier’s financial statement for that year indicates that it
15 See supra note 14.
16 In his report, Mr. Kramer assumed Renier had only
$225,000 in excess working capital, which would have generated
approximately $65,000 in interest over the base period. Mr.
Kramer’s computation of excess working capital, however, does not
account for the double-counted liability of $137,038 conceded
during trial by both experts. When this double counting is
corrected, it results in a reduction in Renier’s liabilities of
$137,038 and a corresponding increase in total assets. Because
Renier’s working capital requirements using Mr. Kramer’s formula
are unaffected by this correction, Mr. Kramer’s computation of
excess working capital would increase by $137,038 as a result,
from $225,000 to $362,038. Therefore, under Mr. Kramer’s
formula, the interest generated over the base period from the
increased figure for excess working capital is $104,584, rather
than $65,000.
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