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Adjusted Book Value Method
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| 5.3.1 Adjusted Book Value Method The adjusted book value for the subject was based on a fair market value standard of value. The primary adjustments were based on previous discussions and analysis conducted in Section 4.8.1 Financial Statement Normalization. Specifically, the following adjustments were made • Stockholder and officer loans and advances were valued at $0 because there has been no apparent effort made to pay the principal through normal means Page 108 of 141 they are effectively treated as dividends with a corresponding reduction in retained earnings. • The life insurance receivable, while a valid asset is considered to be non‐ operating and therefore should be accorded no portion of the subject’s earnings from operations this was valued at $0 under the Adjusted Book Value Method and treated as dividends with a corresponding reduction in retained earnings. • A review of operating equipment noted two relatively new pieces of equipment which are being depreciated over a seven‐year life while their actual useful life can be in excess of 15 years. Other equipment, while aged, has been well‐ maintained and is considered in excellent working order. Accordingly, the netbook value of property and equipment was written up $13,123.70 The following table illustrates the impact of making the aforementioned adjustments |