- 60 -
and stated that “Correction of this error in math will raise the
allowable compensation to Jack Brewer by about $94,000.” In his
rebuttal report, Hakala appears to have corrected this error19
and has increased his recommended reasonable compensation amounts
by a total of $92,044 for 1995 and 1996.
We note that Hakala did not make any change to his original
WACC amounts, in correcting his expert witness report, and that
his “bottom-line” determinations changed by almost the same
amount that Sledge stated would be the case if Hakala were to
make the corrections. Yet, when asked about this matter at
trial, Hakala testified that his error was in the weighting of
the two components of WACC, and not in the assumed tax rate.
We have described supra some mathematical errors that Hakala
made in his WACC calculations. Hakala did not correct these
errors. It appears that if these were corrected, then Hakala’s
“bottom-line” numbers would be greater, but we cannot tell by
what amounts.
c. Determination of Compensation Formula
After Hakala determined a net required rate of return of
16.77 percent, he “conducted an analysis to determine a
compensation formula to arrive at a reasonable range for
19 We say “appears to”, because Hakala’s final numbers are
not precisely the same as Sledge’s numbers. We suspect that the
differences are due to rounding at earlier stages of the
computation, but we cannot be sure, because Hakala does not
present a clear explanation of what he did.
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