Estate of George C. Blount, Deceased, Fred B. Aftergut, Executor - Page 20

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          capacity, including an allowance for taxes and a downward                   
          adjustment to earning capacity of $200,000 to account for annual            
          contributions to the ESOP.  He also adjusted for depreciation,              
          capital investment, and retained working capital.  He concluded             
          that BCC would have $234,060 in net free cashflow capacity.                 
               Mr. Fodor then determined a capitalization rate; i.e., the             
          rate an investor would require to invest in BCC taking into                 
          account the riskiness of the investment, and an expected growth             
          rate.  Mr. Fodor calculated a capitalization rate of 32.94                  
          percent.  He chose 4 percent as his expected growth rate.  Mr.              
          Fodor subtracted the expected growth rate from the capitalization           
          rate to yield a net capitalization rate, which he then divided              
          into the net free cashflow capacity to calculate BCC’s                      
          capitalized earnings.  He determined capitalized earnings of                
               Mr. Fodor added approximately $5.6 million to capitalized              
          earnings, consisting of BCC’s net working capital (current assets           
          less current liabilities) as of the valuation date ($3,187,372)             
          as well as an amount equal to the difference between BCC’s                  
          assets’ book value and fair market value (as reflected in BCC’s             
          internal “value in use” analyses) ($2,555,895).  He then                    
          subtracted $750,000, which he claimed reflected the obligation to           
          repurchase BCC shares held by ESOP participants upon retirement             

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Last modified: May 25, 2011