The Charles Schwab Corporation and Subsidiaries - Page 44

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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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