Fair Market Value of the ABC Company at 30 June 2013. July 8, 2013. Our Engagement.
Capstone Valuation Services, LLC (“CVS”) has prepared the attached report pursuant to our engagement by ABC Company (“ABC” or “the Company”) to provide a fair market value of the Company as of June 30, 2013 (the “Valuation Date”). CVS understands that our opinion is to be used for tax planning purposes with the contemplated restructuring.
CVS performed this valuation analysis with subject company data, as well as information obtained from other sources including Capital IQ, the internet and other public and private sources. CVS has not performed any audit or other verification work on this data. The procedures CVS performed are substantially less in scope than an examination, the objective of which is the expression of an opinion on financial information. Accordingly, CVS does not express such an opinion on the Company’s operating results, projections or any of the information provided to us. Further, our valuation opinion expressed herein is contingent upon the conditions set forth in the “Statement of Assumptions and Limiting Conditions” included herein on the following page of this report. Had CVS performed additional procedures, other matters might have come to our attention that would have been reported to you and that may otherwise have altered our valuation analysis.
This report was prepared under the supervision of Bruce B. Bingham, FASA, and it isfor the purpose of tax planning for ABC Company and its owners. It should not be used for any other purpose. This report contains confidential information and may not be distributed or disclosed to any other party.
Capstone Valuation Services, LLC
July 8, 2013
The general assumptions and limiting conditions pertaining to the valuation analysis are summarized below.
1. To the best of our knowledge and belief, the statements of facts contained in this document, upon which the analysis and opinions expressed are based, are true and correct. Information, estimates and opinions furnished to us and contained in this document or utilized in the formation of the value conclusions were obtained from sources considered reliable and believed to be true and correct. However, no representation, liability or warranty for the accuracy of such items is assumed by or imposed on us, and is subject to corrections, errors, omissions and withdrawal without notice.
2. This valuation opinion may not be used in conjunction with any other appraisal or study not so specified in this report. The value conclusions stated in this document are based on the assumptions described in this document. The valuation was prepared solely for the purpose, function and party identified in this report. This report may not be reproduced, in whole or in part, and the findings of this document may not be utilized by any third party for any purpose, without the express written consent of Capstone Valuation Services, LLC (“CVS”).
3. No change of any item in any part of this document may be made by anyone other than a CVS executive director, and CVS shall have no responsibility for any such unauthorized change.
4. The work papers for this engagement are being retained in our files and are available for your reference. CVS would be available to support our valuation conclusions should this be required. Those services would be performed for an additional fee.
7. CVS takes no responsibility for any events, conditions or circumstances affecting our opinion of value that take place subsequent to the valuation date.
8. This valuation analysis is based on historical and prospective financial statements. Some assumptions or projections inevitably will not materialize and unanticipated events and circumstances may occur during the forecast period. These could include changes in the economic conditions; significant increases or decreases in current interest rates and/or terms or availability of financing altogether; and/or major revisions in current state and/or federal tax or regulatory laws. Therefore, the actual results achieved during the projection period could vary from the projection. Such variations could be material and have an impact on the opinion stated herein.
9. Our work with respect to prospective financial information did not constitute an audit or an examination, compilation, or agreed upon procedures engagement of a financial forecast in accordance with standards established by the American Institute of Certified Public Accountants, and CVS does not express assurance of any kind thereon.
Executive Summary 5
Economic, Industry & Company Profile 7
Market Approach 12
Guideline Public Company Method 14
Guideline Transaction Method 19
Income Approach 21
Discounted Cash Flow 31
Calculated FMV of TIC 32
The price at which the property would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of relevant facts.
[Source: National Economic Review First Quarter of 2013]
[Source: “Billboard & Outdoor Display Advertising in the US”; May 2013; IBISWorld]
WACC = (D/V)*((1-t)*Kd) + (E/V)*Ke
where t= tax rate, D= value of debt, E= value of equity, V= total value, Kd= cost of debt, Ke= cost of equity
Bruce B. Bingham, FASA
Note: The historical balance sheets presented above and on the following page include year end balances from the XXXX and XXXXXX operations only.