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In that table, Hakala uses interchangeably “5 times EBIT” and
“FMV of BQH [petitioner]”. Hakala does not appear to use the
five times EBIT amount to derive anything.
Hakala has not explained, and we have not been able to
discern, any role that Hakala’s fair market value analysis played
in producing Hakala’s bottom-line reasonable compensation
conclusions. Under these circumstances, we do not pause to
consider the appropriateness of Hakala’s choices of the three and
five multipliers (why not 2� and 5�, or some other sets of
numbers), of Hakala’s choices of things to multiply (owners’
discretionary cashflow and EBIT), of Hakala’s choices of
equivalents (three times owners’ discretionary cashflow is
equivalent to the fair market value of petitioner’s operating
assets; five times EBIT is equivalent to the fair market value of
petitioner), and of Hakala’s method of deriving implied
reasonable compensation from these multiplier rules of thumb.
We have thought it appropriate to consider Hakala’s fair
market value analysis only because (1) Hakala presented it at the
head of his independent investor returns analysis, and (2) it
helps us in evaluating the complexities of the remaining portions
of Hakala’s independent investor returns analysis.16 However, we
16 In Gilbert and Sullivan’s “Patience”, the character
Bunthorne extols obscurity and complexity as the route to
creation of an impressive persona, as follows:
(continued...)
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