John E. Wall - Page 32




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          measures and seven companies used by Ms. Walker.22  In addition,            
          the multiples chosen by Mr. Schroeder appeared to vary more from            
          one guideline company to another than the multiples chosen by Ms.           
          Walker.                                                                     
               Notwithstanding these distinctions, the major methodological           
          difference between the guideline company approaches of Mr.                  
          Schroeder and Ms. Walker is that Mr. Schroeder treated the media            
          note as a separate, “nonoperating” asset.  As a result, Mr.                 
          Schroeder used a three-step procedure to derive his market-based            
          value for Demco.  First, he developed four historical performance           
          measures for Demco that completely excluded the media division’s            
          operating results and the interest payable on the media note.               
          Second, he applied the guideline company multiples he developed             
          to those measures.  Third, he added the media note’s $1,080,000             
          face amount to his guideline company value.                                 
               Having performed these steps, Mr. Schroeder concluded that             
          the value of Demco’s equity, before any discounts, was                      

               22 The four measures used by Mr. Schroeder were:  “adjusted            
          net income” for 1991 and for 1987 to 1991, and “revenues” for               
          1991 and for 1987 to 1991.  Mr. Schroeder’s revenues were equal             
          to Demco’s net revenues as calculated by Ms. Walker.  Mr.                   
          Schroeder’s “adjusted net income” was equal to Demco’s net income           
          as calculated by Ms. Walker, less:  (1) The 6 months of interest            
          on the media note included in Ms. Walker’s net income for 1991;             
          (2) a few nonrecurring items; and (3) a provision for income tax            
          at 34 percent.                                                              
               The third guideline company used by Mr. Schroeder was Viking           
          Office Products, Inc.                                                       





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