- 34 -
result in an indication of a value which included the value of
intangible assets.
Wilhoite decided that a better valuation would come from
employing the market approach; i.e., examining transfers of
ownership of comparable home health care agencies. His market
approach utilized two types of transfers. One involved the
valuation of comparable publicly traded home health care
agencies. The other valued the consideration paid for merged or
acquired companies. In addition to the two-pronged market
approach, Wilhoite also utilized an income method, wherein he
calculated the value of the Sta-Home tax-exempt entities’ cost-
savings attribute to a potential buyer.
As a basis for his valuations under both the market and
income approaches, Wilhoite ascertained the market value of
invested capital (MVIC) for the Sta-Home tax-exempt entities.
The MVIC represents the market value of a company’s capital
structure–-all of its ownership equity and all of its interest-
bearing debt. The MVIC method is commonly used in the valuation
of closely held companies. Its use operates to minimize
differences in capital structure between a closely held company
and publicly traded companies which are used as comparables. See
Pratt et al., Valuing Small Business and Professional Practices
548 (3d ed. 1998).
Page: Previous 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 NextLast modified: May 25, 2011