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For petitioner’s 1992 through 1999 fiscal years in issue, this
results in reasonable compensation to Mr. Wechsler totaling
$16,050,820.
We estimate that this results in petitioner’s having a
compounded annual return on its revised common stock equity,
adjusted for deferred taxes, of approximately 16.3 percent for
its 1992 through 1998 fiscal years. That calculation is as
follows:
Revised Adj. Compounded
Adj. Common Common Stock Annual Annual
Stock Equity Equity Rate of Rate of
FYE May 31 (millions)1 (millions)2 Return3 Return4
1991 $14.533 $14.533 -- --
1992 16.924 18.412 26.7% 26.7%
1993 19.828 22.768 23.7 25.2
1994 18.100 24.485 7.5 19.0
1995 22.893 31.128 27.1 21.0
1996 30.177 39.261 26.1 22.0
1997 27.591 37.205 (5.2) 17.0
1998 29.079 41.738 12.2 16.3
1999 19.539 32.868 (21.2) 10.7
1 Common stock equity per annual FOCUS report, less deferred
taxes.
2 Adjusted common stock equity, plus cumulative estimated
additional after-tax earnings attributable to petitioner’s
increased positive taxable income for prior years and current
year from disallowed, nondeductible compensation paid to Mr.
Wechsler, Mrs. Wechsler, and Gilbert, assuming those increases in
positive taxable income were subject to combined Federal and
State income taxes equal to 40 percent.
3 Increase or decrease for that year in revised adjusted
common stock equity, divided by revised adjusted common stock
equity at beginning of that year.
4 Computed using a present-value-future-value formula where:
Present value equals revised adjusted common stock equity of
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