-85-
approximately three times the 4-percent rate that we believe
reflects the time value of money and, as discussed above, is the
same rate at which a holder of series A preferred stock would be
compensated following an untimely redemption. A 12.5-percent
rate also approximates the rate that as of the applicable
valuation date was payable on the series B subordinated
debentures, the debt into which the series A preferred stock was
convertible, and is 5 percentage points greater than the rate
that was payable on the senior term notes as of December 31,
1992.53
The estate asserts on remand that we should determine the
fair market value of the series A preferred stock by applying a
20-percent discount rate to the $1,947,845 actually paid to
redeem the decedent’s shares. We disagree. In addition to the
fact that the estate’s proffered rate does not take into account
our finding that a holder of series A preferred stock would
following a missed redemption be entitled to daily dividends at a
12.5-percent annual rate, the estate’s rate ignores the solid
history of Sterling in honoring its contractual obligations. We
also are unpersuaded by the record before us that a rate
approximately seven times the referenced T-bill and inflation
rates is appropriate in this case, let alone that we should apply
53 We recognize that Dec. 31, 1992, postdates the applicable
valuation date. We believe that a hypothetical buyer on the
applicable valuation date could have ascertained this rate.
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