- 34 -
"Western Region"23 for a weighted average of the medical
specialties comprising SWMG, or 45.18 percent.
The asset value was based upon a capitalization of excess
earnings approach. In making his computations under the excess
earnings approach, Mr. Dutcher used the Narvco appraised value of
the tangible assets of the medical practices of the UHMG
physicians who transferred their practices to SMG (namely,
$1,156,733), as the value of SWMG's fixed assets. Mr. Dutcher's
estimate of the business enterprise value of SWMG computed under
the excess earnings approach was $4,061,400.
Finally, Mr. Dutcher used a market approach whereby he
derived a business enterprise value for SWMG based on a
comparison with price/earnings ratios of publicly traded health
care companies, with a 23.1-percent discount for SWMG's smaller
size, a 35-percent premium reflecting control, and a discount for
lack of marketability of 10 percent, resulting in an indicated
value of $4,076,400. Weighting the three values in the manner
previously noted produced a business enterprise value of
$4,088,450.
As noted, Mr. Dutcher treated the value of SWMG's intangible
assets as SWMG's business enterprise value ($4,088,450), less (i)
23 Mr. Dutcher's figures were taken from a "Physician
Compensation Survey", based on data from a report by the Center
for Research in Ambulatory Health Care Administration, "Physician
Compensation and Production Survey: 1994 Report Based on 1993
Data".
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