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assets, than companies in the SIC group most closely
approximating BCC.39 In these circumstances, we are persuaded
that adding the value of nonoperating assets, including life
insurance proceeds, to capitalized earnings, as Mr. Hitchner
proposed, is an appropriate measure of BCC’s income-based
value.40
Because BCC had positive net assets, treating the life
insurance proceeds as a nonoperating asset also produces an
increase in the asset-based value of BCC, equal to the amount of
the proceeds, under all three asset-based approaches employed by
the experts herein. Thus, because the life insurance proceeds
are added in both the income- and asset-based approaches, they
result in an increase in the final blended value of BCC equal to
the amount of the life insurance proceeds, regardless of the
respective weights given to the income- or asset-based approach.
Accordingly, we are persuaded that Mr. Hitchner was correct in
39 Although we concluded supra at Pt.II.C.3. that Mr.
Hitchner overestimated the extent of BCC’s excess cash, after our
adjustment BCC’s excess cash on the valuation date was still
approximately $1.5 million.
40 We note that even if we were to adopt Mr. Fodor’s
proposal regarding the necessary additions to capitalized
earnings to derive an income-based value, the life insurance
proceeds would still be added to capitalized earnings, and the
income-based value would increase dollar for dollar. Had he not
offset the life insurance proceeds with BCC’s obligation to
redeem decedent’s shares, those proceeds would have been an
addition to net working capital, which Mr. Fodor added to BCC’s
capitalized earnings in calculating an income-based value.
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