- 36 -
Setting these objections aside for the moment, Mr. Schroeder
calculated his income-based value of Demco as follows. First, he
calculated the present value of Demco’s 1992-96 projected net
income, by discounting it at his 15- to 17-percent rates.
Second, he computed a 1997 residual value for Demco, by assuming
that Demco’s 1996 projected net income would grow at 3 percent
per year in perpetuity and capitalizing that income at his 17-
percent rate; he then discounted that terminal value back to a
present value as of the date of the gifts. Third, he added the
foregoing values together and applied his 17-percent minority
discount, to arrive at an income-based minority equity value of
$4,770,010. Fourth, he added the face amount of the media note
to arrive at a total equity value of $5,850,010. Fifth and
finally, he applied his 40-percent lack-of-marketability and 2-
percent nonvoting discounts, to arrive at rounded values of
$2,440,000 or $260.61 per share. This is approximately $85 per
share higher than Ms. Walker’s $175.24 per share income-based
value.
Mr. Schroeder’s Conclusion
Mr. Schroeder made his overall appraisal of Demco’s value by
combining his income-based and market-based values and giving the
income-based value approximately twice as much weight. In Mr.
Schroeder’s overall opinion, the fair market value of the Demco
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