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determined in his prior report that was used to prepare the
statutory notices.
Notwithstanding their differing conclusions as to value,
Ms. Walker and Mr. Schroeder agree on the following important
points.
1. Both accept the same data as an accurate
representation of Demco’s financial performance.
2. Both agree that the guideline companies used in the
market-based approaches are in fact comparable to Demco; two
of the three companies used by Mr. Schroeder were included
in the seven companies used by Ms. Walker.
3. Ms. Walker used a capitalization rate of 22.75
percent in her income-based analysis, while Mr. Schroeder
used rates varying from 15 to 17 percent. However, Ms.
Walker assumed that Demco would grow 5 percent per year,
while Mr. Schroeder assumed 3-percent growth. The
difference between the experts’ positions (17.75-percent
effective or net capitalization rate for Ms. Walker, 12-to-
14-percent net rate for Mr. Schroeder) is therefore less
than first appears.
4. Both Ms. Walker and Mr. Schroeder agreed that a 40-
percent lack of marketability discount was appropriate.
5. Both Ms. Walker and Mr. Schroeder agreed that a
nonvoting stock discount should also be applied; Ms. Walker
asserted that the discount should be 5 percent while Mr.
Schroeder contended that a 2-percent discount was more
appropriate.
Despite the closeness of the parties’ original positions and the
large areas of agreement between the experts that existed even at
time of trial, the parties have been unable to settle their
differences, and we are now required to value the Demco stock.
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