John E. Wall - Page 22




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          comparing the trading prices of restricted stock with freely                
          traded stock, and other studies comparing the trading prices of             
          stock before and after initial public offerings, Ms. Walker                 
          concluded that a 40-percent lack of marketability discount should           
          be applied to her guideline public company value.  In addition,             
          on the basis of other studies comparing prices of voting and                
          nonvoting stock, Ms. Walker concluded that a further 5-percent              
          discount should be applied to reflect the nonvoting status of the           
          stock given by Mr. Wall.                                                    
               After having applied these discounts, under Ms. Walker’s               
          historical performance measures/guideline public company approach           
          the fair market value of the Demco nonvoting common stock as of             
          the date of the gifts was $212.20 per share.14                              
               Forecasted-Earnings Approach                                           
               Ms. Walker also applied the guideline public company                   
          approach to Demco’s projected earnings for 1992, the year of the            
          gifts.  Using projections made by Demco’s management, Ms. Walker            
          calculated three forecasted earnings measures for Demco:  1992              
          EBIT, EBDIT, and after tax earnings.  Applying multiples derived            
          from two of her guideline companies to these forecasted earnings            


               14 The calculation is (total equity value) times (1 minus              
          lack of marketability discount) times (1 minus nonvoting                    
          discount) divided by (number of shares outstanding), or                     
          ($4,914,000) times (.6) times (.95) divided by (13,200) equals              
          ($212.20 per share).                                                        





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Last modified: May 25, 2011