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prices of the guideline companies, in order to determine the
multiples of the performance measures at which the public stock
markets valued the total invested capital of the guideline
companies. Applying these multiples to Demco’s performance
measures, and giving greater weight to the indicated values
developed from the earnings based measures, Ms. Walker determined
that the publicly traded equivalent value of Demco’s total
invested capital, as of December 31, 1991, was $10,550,000.13
Ms. Walker then subtracted the book value of Demco’s debt
($5,636,000) from this amount, to conclude that the indicated
fair market value of Demco’s equity (before applying any
discounts) was $4,914,000.
Because the guideline public company method determines value
by reference to the trading prices of minority interests, Ms.
Walker did not apply a minority discount to her indicated value
of Demco’s equity. However, on the basis of several studies
12(...continued)
Banta Corp.; Educational Development Corp.; Kleer-Vu Industries,
Inc.; Library Bureau, Inc.; Stuart Hall Co., Inc.; and United
Stationers, Inc.
13 Although Ms. Walker’s reports appraised the value of
Demco stock as of Dec. 31, 1991, the day before the date of the
gifts, the parties have not suggested and nothing in the record
suggests that Ms. Walker’s opinion would be any different with
respect to the stock’s value as of the date of the gifts. For
convenience, we hereinafter discuss Ms. Walker’s reports and
opinions as though they referred to fair market value as of the
date of the gifts rather than the day before.
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