-30-
In forecasting the cash flow for the DCF method, Dr. Hakala
did not use the expenses in the projections Kohler provided him.
He decided to make his own assumptions about expenses. Dr.
Hakala applied these assumptions without first discussing them
with anyone at Kohler.
Dr. Hakala created two DCF models, one using revenues from
the operations plan and one using revenues from the management
plan. He weighted the results he derived from these two DCF
models in a manner inconsistent with the reality of the business.
He weighted the realistic management plan based model 20 percent
and the more aspirational operations plan based model 80 percent
because he thought the aspirational operations plan was a more
likely scenario.
Dr. Hakala made a last minute correction to the value he
determined under the income approach at trial. His error
resulted in an $11 million overvaluation of the Kohler stock in
his report.
Under the market approach, Dr. Hakala used two methods.
Like the estate’s experts, he used the guideline company method,
but was the only one of the three experts who used the
transaction method.11 While the estate’s experts did not find
10(...continued)
such as initial public offerings.
11The guideline company method examines certain financial
(continued...)
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