- 36 -
that when acquired, it had reported revenues of $15.3 million but
overall losses of 1.9 percent. Nurse-Care, Inc., sold for an
MVIC revenue multiple of .21. Taking these factors into
consideration, Wilhoite selected a revenue multiple of .25 times
the last year’s revenue. This amount was approximately 20
percent higher than that of Nurse-Care, Inc., but 50 percent
lower than the guideline for the median merged or acquired
companies. Having applied the .25 multiple to the Sta-Home tax-
exempt entities’ last 12-month revenue of $45,209,000, Wilhoite
arrived at an MVIC of $11,302,000.
Wilhoite then turned to the income approach. He ascertained
that the Sta-Home tax-exempt entities could generate meaningful
income for a purchaser that was positioned to use the cost-
shifting strategy. An officer of Sta-Home tax-exempt entities
had indicated to Wilhoite that the entities had historically
received reimbursed costs in an amount that was 5 percent below
the limit they were allowed. Wilhoite ascertained that the
annual value of such a saving in 1995 was $1,408,168. To
ascertain the present value of a stream of such payments,
Wilhoite ascertained an appropriate multiplier by examining the
weighted average cost of capital for Sta-Home tax-exempt
entities, less the anticipated increases generated by long-term
growth. Wilhoite arrived at a capitalization rate of 12.8
percent. This capitalization rate yielded a value for the Sta-
Page: Previous 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 NextLast modified: May 25, 2011