- 37 -
Present Value
Fiscal of Estimated
Year Cashflows
1998 $ 1,390,000
1999 1,333,000
2000 1,251,000
2001 1,178,000
2002 1,108,000
Subtotal $ 6,260,000
Plus Liquidation Value 152,567,000
Valuation of TPC $158,827,000
In calculating the residual value for TPC to be added to his
net cashflow projections for 1998-2002, respondent’s expert’s
switch in his revised report from a terminal value to a
liquidation value calculation appears to us to be an effort on
the part of respondent’s expert to keep the valuation for TPC
relatively high.12
12 Generally, terminal value is used to compute an entity’s
residual value beyond the period for which an entity’s net
cashflows are projected, whereas liquidation value generally is
used only when the entity being valued has plans to liquidate at
the end of the projection period. Copeland, et al., Valuation
284 (3d ed. 2000) (providing that liquidation value should not be
used “unless liquidation is likely at the end of the forecast
period”). Here, TPC’s management, as of May of 1998, had no
plans to liquidate TPC. Using the correct $1.609 million in
deferred tax add-back, the calculation under respondent’s
expert’s discounted cashflow method using a terminal value
calculation for TPC’s 2002 residual value would have reflected a
May 2, 1998, fair market value for TPC of only $21.7 million as
follows:
Present Value
Fiscal of Estimated
Year Cashflows
1998 $ 1,390,000
1999 1,333,000
2000 1,251,000
2001 1,178,000
2002 1,108,000
Subtotal $ 6,260,000
Plus 2002 Terminal Value 15,415,372
Valuation of TPC $21,675,372
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