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Respondent’s expert (Mr. Shepard) valued cash and margin
customer accounts using a different approach from Mr. Knoblick’s.
As previously noted, Mr. Shepard divided the valuation of the
cash and margin accounts into three categories to comport with
classification that had been used by Rose, whereas Mr. Knoblick
used two categories to comport with petitioner’s classification.
Mr. Shepard valued the cash accounts at $610,000, with a 5-year
useful life; margin accounts at $500,000, with a 4.3-year useful
life; and cash management accounts at $830,000, with a 10.3-year
useful life.
The most significant difference between the approaches of
Messrs. Shepard and Knoblick is to be found in their perspective.
Mr. Knoblick valued the Rose accounts on the basis of empirical
information derived from petitioner’s account experience. Mr.
Knoblick reached the conclusion that the customer accounts were
the only assets that were of value to a buyer. Mr. Shepard,
however, used a more theoretical approach by valuing Rose as a
going concern under traditional methods of valuing Rose’s
business income and cash-generating capacity. He used that
approach even though his report contains information about Rose’s
poor performance and weak financial condition. Mr. Shepard, in
his valuation, focused on the volatile nature of the equities
market and a low point in the market during October 1987. Mr.
Shepard’s use of those factors resulted in an unnecessarily lower
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