- 24 -
depreciation charges for 5 years; (2) estimated working capital
requirements and capital requirements; and (3) derived the
estimated net cash-flow to stockholders equity for each of the 5
years. The net cash-flow for each of the years was discounted to
present value. The sixth-year estimated cash-flow was
capitalized to give an indication of the value of the
stockholders equity in JM at the end of the forecast period. The
residual value of JM was also discounted to present value. Mr.
Stewart then subtracted projected capital expenditures in
arriving at his valuation of JM.17 On the basis of these
considerations and findings, Mr. Stewart determined that the
overall value of JM under the DCF approach was $675,000.
Mr. Stewart used the same appraisal procedures to value
Specialty. In applying the market comparable method, Mr. Stewart
used the same five companies that he used in valuing JM. The
invested capital to revenue, EBDIT, and price-to-book value
measures indicated values of the aggregate minority interest in
Specialty ranging from $178,000 to $327,000. Giving greater
weight to the price-to-book value, Mr. Stewart determined that
Specialty had a value of approximately $300,000. Mr. Stewart
applied the same valuation methodology under the DCF method that
17Mr. Stewart did not subtract projected capital
expenditures in his original report. At trial, Mr. Stewart
admitted that this was an error, and his valuation report was
corrected posttrial to adjust for the error.
Page: Previous 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 NextLast modified: May 25, 2011