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explanation of the Leichters’ role at Harlee in concluding that a
15-percent discount should be applied for the lack of continuity
of management. We accord no weight to Mr. McCallum’s report
because of the lack of adequate explanations in support of his
conclusions.
Mr. John Thomson was hired by respondent for litigation
purposes, and he opined that Harlee’s value was $2,150,000 as of
October 23, 1995–-an amount less than respondent’s original
determination of $2,718,358. Primarily, Mr. Thomson used two
methods in arriving at his value. Through the market approach,
he compared Harlee to five publicly traded firms, discounted the
value of Harlee to match more accurately the comparables to the
subject and added both a 15-percent control premium and an excess
working capital value of $900,000. Through the income method,
Mr. Thomson forecasted Harlee’s sales for the subsequent 5 years
and used a net discounted cashflow method to value those sales at
present value. In so doing, Mr. Thomson looked at Harlee’s
previous 5 years of operation and then discounted the future
cashflow by 17 percent.
Mr. Thomson’s methodology was within reasonable range and
his conclusions were adequately supported by the facts in the
record. Mr. Thomson’s $2,150,000 value was in harmony with the
$2,261,713 value arrived at by the probate referee and the
$2,091,750 value reported by the estate on its estate tax return.
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