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SWMG's "business enterprise value" less SWMG's (i)"implied
working capital" and (ii) fixed assets.21
Mr. Dutcher derived the business enterprise value of SWMG by
taking the weighted average of what he computed to be SWMG's
value based on an income method (50 percent), an asset method (40
percent), and a market method (10 percent). The income value was
based upon a discounted future distributable earnings approach
whereby an estimate of SWMG physicians' aggregate revenues for
199422 was projected forward, and the future after-tax
distributable earnings then discounted to present value,
producing a business enterprise value on November 1, 1994, of
$4,112,500. In calculating what SWMG's future distributable
earnings would be, Mr. Dutcher assumed that the expense of
physician compensation would equal the national median for the
21 The Dutcher appraisal treated the fixed assets of SWMG as
equal to the fixed assets of the medical practices of each of the
SWMG physicians (or partnership) who transferred his or her (or
its) practice to SMF.
22 SWMG did not exist as an operating entity until Nov. 1,
1994. Mr. Dutcher treated as SWMG's 1994 revenues the estimated
1994 aggregate revenues of the 29 UHMG physicians who transferred
their practices to SMF, plus the 1994 revenues of 5 of the 7
"hired" physicians in SWMG who did not have ownership interests
in a medical practice when the affiliation with SMF consummated.
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