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assets26 and revenues27 than the companies used by Mr. Stewart.
Mr. Browning compared JM to the other companies using debt-free
earnings, earnings before interest and taxes (EBIT), and earnings
before interest, taxes, depreciation, and amortization (EBITDA).
These measures indicated a business enterprise value of JM
ranging from $500,000 to $800,000. On the basis of this range,
Mr. Browning determined that the total business enterprise value
of JM was $650,000.
In applying the income approach to JM, Mr. Browning used a
10-year projection period beginning November 1, 1951. Mr.
Browning considered JM’s projected sales, cost of sales,
operating expenses, depreciation, taxes, capital expenditures,
and working capital changes. After discounting projected cash-
flows and residual value, Mr. Browning determined that the total
business enterprise value of JM was $660,000.
After reviewing the analyses and available information, Mr.
Browning determined that the total business enterprise value of
JM was $655,000. Mr. Browning then subtracted the debt value to
determine the equity value of JM. On the basis of the present
26JM’s total assets at the time of the 1951 Agreement were
approximately $2 million, while the comparables used had total
assets ranging from approximately $7.6 to 38 million.
Specialty’s total assets were smaller than JM’s.
27JM’s revenues at the time of the 1951 Agreement were
approximately $5 million, while the comparables used had revenues
ranging from approximately $13.2 million to $57.8 million.
Specialty’s revenues were smaller than JM’s.
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