FAIR MARKET
VALUE APPRAISAL
Subject Company:
Sample Company Heating & Air
Subject Interest:
100% ownership interest
Date of Appraisal:
November 30, 2016
Date of Report:
December 8, 2016
Page 1 of 1
Green Country Business Valuations, LLC
www.greencountrybv.com
December 8, 2016
Anywhere Bank
Attn: John Customer
123 Main St
Anytown, USA 12345
RE: Calculation of Value for 100% interest in Sample Company Heating & Air
Dear Mr. Customer:
We were retained by your Company to perform limited business valuation services of a 100%
interest in Sample Company Heating & Air (“The Company”) as of November 30, 2016, to be
used as the basis for obtaining S.B.A. financing for an acquisition. These services fall under the
National Association of Certified Valuation Analysts’ Professional Standards. This type of service
is explained in this standard as follows:
“Calculation Engagement ‐ occurs when the client and member agree to
specific valuation approaches, methods, and the extent of selected procedures
and results in a Calculated Value.”
Pursuant to our retention, we have presented our findings in a Calculation Report. A calculation
report will contain less information than would be included in a Detailed or Summary Report
under a Valuation Engagement. Our standards do not permit a detailed report to be used for
this type of engagement, and therefore, this report is only appropriate for the client’s review.
This limited report may be misunderstood by those who are not familiar with all of the facts
surrounding this engagement.
Unless otherwise noted in this agreement, this Calculation Engagement is expected to be
performed by Green Country Business Valuations, LLC considering an income approach, a
market approach, if sufficient relevant data can be located. An asset approach will be
considered to the extent that it can be performed without fixed and intangible asset appraisals.
We did not perform a site visit or formal management interview as part of this engagement.
We also did not perform an Economic Analysis and Industry Profile as is required in a Detailed
Report. As such, our estimate of value may differ from a conclusion of value had a valuation
engagement been performed.
Although the purpose of this Calculation Engagement is to determine the reasonable value of
the subject Company, the client has requested only limited analyses to be performed. Green
Country Business Valuations, LLC will perform limited analyses to estimate the negotiable price
9524 E. 81st St. Ste. 1504B
Tulsa, OK 74133
918‐994‐2095
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www.greencountrybv.com
that can be used by the client in lieu of the more definitive estimate of fair market value of the
subject Company. Fair market value is defined to be a value at which a willing seller and willing
buyer, both being informed of the relevant facts about the business, could reasonably conduct
a transaction, neither party acting under any compulsion to do so.
It is understood that as a result of this assignment, the report cannot be attached to any tax
return and no expert testimony shall be provided.
The following documents were used in the analysis:
Form 1120, U.S. S Corporation Tax Returns 2014 through 2015
Internal Financials through November 30, 2016
Other items referenced throughout the report
1.0 FINANCIAL ANALYSIS
The book value of the Company was $305,098 with assets totaling $344,454 as of November
30, 2016.
The unadjusted income statement for the Company is as presented:
This section continues on the following page.
9524 E. 81st St. Ste. 1504B
Tulsa, OK 74133
918‐994‐2095
Green Country Business Valuations, LLC
www.greencountrybv.com
Table 1 – Unadjusted Income Statement
SALES
Cost of Goods Sold
GROSS PROFIT
11/30/2016
$ 775,021 100.0% $
$ 324,119 41.8% $
$ 450,902 58.2% $
12/31/2015
781,090 100.0% $
427,841
54.8% $
353,249
45.2% $
12/31/2014
569,374 100.0%
331,002
58.1%
238,372
41.9%
OPERATING EXPENSES
Officer's Compensation
Other Salaries & Wages
Repairs & Maintenance
Bed Debts
Rents
Taxes & License
Interest Expense
Depreciation
Advertising
Employee Benefit Programs
Other Operating Expense
Total Operating Expenses
$
‐
$ 204,890
$
576
$
‐
$ 24,000
$
320
$
‐
$
‐
$
5,815
$
‐
$ 95,572
$ 331,173
0.0%
26.4%
0.1%
0.0%
3.1%
0.0%
0.0%
0.0%
0.8%
0.0%
12.3%
42.7%
$
$
$
$
$
$
$
$
$
$
$
$
70,327
‐
1,846
‐
24,404
14,806
865
16,981
9,465
‐
81,411
220,105
9.0%
0.0%
0.2%
0.0%
3.1%
1.9%
0.1%
2.2%
1.2%
0.0%
10.4%
28.2%
$
$
$
$
$
$
$
$
$
$
$
$
69,000
‐
3,070
‐
24,469
15,273
‐
2,124
12,946
‐
95,119
222,001
12.1%
0.0%
0.5%
0.0%
4.3%
2.7%
0.0%
0.4%
2.3%
0.0%
16.7%
39.0%
PRE‐TAX INCOME
$ 119,729
15.4% $
133,144
17.0% $
16,371
2.9%
Since the valuation date (November 30, 2016) is eleven months into the Company’s fiscal year,
a short‐term forecast of the year end 12/31/16 income statement in order to evaluate and
compare the historical performance year over year. The following table provides a summary of
the one‐month forecast for the January 1, 2016 through December 31, 2016‐time shown as a
full year:
This section continues on the following page.
9524 E. 81st St. Ste. 1504B
Tulsa, OK 74133
918‐994‐2095
Green Country Business Valuations, LLC
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Table 2 ‐ Income Statement Forecast 12/31/16
SALES
Cost of Goods Sold
GROSS PROFIT
11 Mos Ended 11/30/16
EST Y/E 12/31/16
NOTES
$ 775,021
100.0% $
845,477 100.0%
$ 324,119
41.8% $
514,701
60.9% Note 1
$ 450,902
58.2% $
330,777
39.1%
OPERATING EXPENSES
Officer's Compensation
Other Salaries & Wages
Repairs & Maintenance
Bed Debts
Rents
Taxes & License
Interest Expense
Depreciation
Advertising
Employee Benefit Programs
Other Operating Expense
Total Operating Expenses
$
‐
$ 204,890
$
576
$
‐
$ 24,000
$
320
$
‐
$
‐
$
5,815
$
‐
$ 95,572
$ 331,173
0.0%
26.4%
0.1%
0.0%
3.1%
0.0%
0.0%
0.0%
0.8%
0.0%
12.3%
42.7%
$
$
$
$
$
$
$
$
$
$
$
$
62,400
‐
628
‐
26,182
16,910
‐
10,991
6,344
‐
104,260
227,715
7.4% Note 1
0.0%
0.1%
0.0%
3.1%
2.0% Note 2
0.0%
1.3% Note 3
0.8%
0.0%
12.3%
26.9%
OPERATING INCOME
$ 119,729
15.4% $
103,062
12.2%
Note 1 – The Company’s tax returns accounts for Salaries and Wages under Cost of Goods Sold.
The company’s internal financials accounts for Salaries and Wages as a SGA expense. To keep
things consistent, the analyst normalized the figure. Based on internal figures, Salaries & Wages
is projected to be $223,516. The husband and wife owners pay themselves $700 per week and
$500 per week respectively which annualizes to $62,400. The remaining balance of $161,116
was placed under Cost of Goods Sold as would be done on the Company’s year‐end tax returns.
Note 2 ‐ To account for payroll taxes, the analyst calculated a figure based off a percentage of
revenue. Taxes and Licenses expense were 1.9% of revenue in 2015. The analyst used 2.0% of
revenue for as the previous year.
Note 3 – The company is not showing any depreciation expense on their internal financials.
Because there was Depreciation Expense in 2014 and 2015, the analyst assumes there will be
Depreciation Expense in 2016 as well. In this case, the analyst used an average of the previous
two years Depreciation Expense as a percentage of revenue which in this case is 1.3%
9524 E. 81st St. Ste. 1504B
Tulsa, OK 74133
918‐994‐2095
Green Country Business Valuations, LLC
www.greencountrybv.com
Business valuation procedures require that the analyst review the financial statements to
determine if any adjustments are needed to better reflect the economic value of a valuation
subject (in other words, normalizing the financial statements). Most adjustments are made due
to the controlling interests’ choices regarding implementation of certain accounting treatments
and tax planning strategies. One of their main focuses is on financial strategies that minimize
taxable income which sometimes result in inconsistent operating performance. The objective of
normalizing the financial statements is to convert the historical financial statements and
performance statistics into amounts that may better reflect the real economics of the
underlying business.
In the case of Martin’s Service, Inc, the analyst would normally believe that the Rent Expense is
below industry averages for a business of this type and size. However, the prospective buyer
will be entitled to the same Rent Expense as the current owner and determined that this did
NOT need to be normalized. After careful analysis, the analyst determined that no items on the
Income Statement or Balance Sheet required normalization.
Revenues have been growing over the years analyzed. 2016 Net Profit margin is projected to
decrease but that could be attributable to an overestimation of Cost of Goods Sold and/or
Taxes and Licenses. As stated above, the analyst had to parcel out the Payroll Expense from the
company’s internal financials and a slight overstatement is possible. The analyst chose to use a
three‐year weighted average as being representative of the future.
2.0 Valuation Calculations
MARKET APPROACH
In order to determine the value of the Company, the analyst considered the market, income,
and asset approaches to valuation. To determine the value under the market approach, we
searched the Institute of Business Appraisers (IBA) Database.
The market produced by the IBA database contained 241 transactions under SIC code 1711
which is defined as Plumbing, Heating, and Air Conditioning. The analyst eliminated all
businesses that were Plumbing only, businesses not related to the Company, and businesses
with greater than $5,000,000 and less than $200,000 in sales. The analyst took the additional
step of eliminating any transactions with metrics that were far outside the norm. This left 172
transactions which is a very good sample size.
The IBA data base generally provides the following information as reported to them:
9524 E. 81st St. Ste. 1504B
Tulsa, OK 74133
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• Short description of the business type;
• Reported annual gross sales ($000’s) of the business sold;
• Reported annual discretionary earnings ($000’s);
• Reported sale price ($000’s);
• Sale price to gross sales ratio;
• Sale price to annual discretionary earnings;
• Geographic area; and
• Year and month of reported sale.
Pricing multiples in the IBA database are calculated on a percentage of sales and a multiple of
Seller’s Discretionary Earnings. The formula for Seller’s Discretionary Earnings is listed below:
Table 3 ‐ Seller's Discretionary Earnings Defined
Normalized Pre‐tax Income
Plus: Interest
Plus: Depreciation & Amortization
Plus: Owner's Compensation
Equals: Seller's Discretionary Earnings
The average Sales Price to Revenues for the transactions analyzed was 0.34 and the median
Sales Price to Earnings was 1.31.
To arrive at a final conclusion using this methodology, we must determine the Company’s net
retained assets. The IBA data base consists of asset sale transactions which generally include
the operating assets (e.g., non‐perishable inventory, fixed assets), and intangible assets
(primarily goodwill); therefore, after the pricing or valuation multiple is applied, the net assets
retained by the seller must then be taken into account (i.e., added in the case of net assets or
deducted in the case where retained liabilities exceed retained assets) to arrive at a complete
operating equity value. Typically, retained assets include cash and accounts receivable offset by
any liabilities that the Company has recorded (e.g., financing arrangements, accounts payable,
accrued expenses) resulting in a net retained asset figure to be used with all IBA data base
generated pricing multiple indicated values.
9524 E. 81st St. Ste. 1504B
Tulsa, OK 74133
918‐994‐2095
Green Country Business Valuations, LLC
www.greencountrybv.com
The following table calculates the value using the two metrics from the IBA database and then
adds in the net retained assets:
Table 4 ‐ Market Approach Calculation
3 Year Weighted Average Sales/Earnings
Long Term Sustainable Growth
Next Year's Valuation Base
Valuation Multiples
Indication of Business Value
Net Retained Assets
Plus: Cash
Plus: Accounts Receivable
Plus: Other Assets
Less: Total Liabilities
Add: Net Retained Assets
Estimate of Operating Value, Control,
Non‐Marketable
Sales Price as % of Sales Price as
Revenue
Multiple of SDE
$
777,998 $
176,581
$
2.0%
793,558 $
2.0%
180,113
$
34%
269,438 $
1.31
235,718
$
$
$
$
$
108,016
36,153
127,187
(39,354)
232,002
$
$
$
$
$
108,016
36,153
127,187
(39,354)
232,002
$
501,440 $
467,720
Statistical Summary of Operating Value
Calculations
Average
$
Rounded
$
484,580
485,000
INCOME APPROACH
The Income Approach is sometimes referred to as the investment value approach. This
approach assumes that an investor could invest in a business enterprise or assets with similar
investment characteristics, although not necessarily the same business or property. This
method is predicated upon the principle of anticipation in that the value of a business
enterprise and its assets is a function of future benefits and returns attributable to the business
and its assets.
9524 E. 81st St. Ste. 1504B
Tulsa, OK 74133
918‐994‐2095
Green Country Business Valuations, LLC
www.greencountrybv.com
The computations used in the Income Approach generally determine that the value of the
business is equal to the expected discounted future income (represented by net cash flow) at
an appropriate rate of return (discount rate). The ultimate discount rate used in the valuation
analyses is developed in such a way that it takes into account most of the underlying risks and
uncertainties involved with the achievement of the forecasted net cash flow. The risk borne by
the investor is two‐fold: (1) a return on the investment, and (2) a return of the investment; the
return should represent the risk of achieving both, a fair return on and a full return of
investment. This can be accomplished by capitalizing a single period income stream or by
calculating the present value (discounting) of a multi‐period forecast.
Under the income approach, the method used was a single income capitalization method.
Three‐year weighted average of EBITDA was used as indicative of future earnings. The EBITDA
calculation is displayed below:
Table 5 ‐ EBITDA Calculation
Weighting
Normalized Net Income
Add: Interest Expense
Add: Taxes
Add: Depreciation
Add: Amortization
EBITDA
3 Year
Weighted
Average
EST 12/31/16 12/31/2015 12/31/2014
3
2
1
$
$
$
$
$
$
103,062
‐
‐
10,991
‐
114,053
$ 133,144 $
$
865 $
$
‐
$
$ 16,981 $
$
‐
$
$ 150,990 $
16,371
‐
‐
2,124
‐
18,495
$
$
$
$
$
$
98,641
288
‐
11,510
‐
110,439
This figure was then increased by the long term sustainable growth rate of 2.0%. Applying a
pre‐tax capitalization rate of 27.49% to the three‐year weighted average of pre‐tax income
results in a calculation as follows:
9524 E. 81st St. Ste. 1504B
Tulsa, OK 74133
918‐994‐2095
Green Country Business Valuations, LLC
www.greencountrybv.com
Table 6 ‐ Capitalization of Three Year Weighted Average EBITDA
3 Year Weighted Average Pre‐tax Income
Long‐term Sustainable Growth Rate
×
"Next Year's" Cash Flow Available for Equity
Pre‐tax Capitalization Rate
÷
Operating Indicated Value on Control, "As if
freely traded" basis (Rounded)
Less: 15% Discount for Lack of Marketability
Non‐marketable Indication of Value
ROUNDED
$
$
$
$
$
$
110,439
102.00%
112,648
27.49%
410,000
(61,500)
348,500
349,000
ASSET APPROACH
The Asset Based Approach may also be referred to as the cost approach and is based primarily
on the fair market value of the balance sheet (including all assets and liabilities) of the company
being valued. Each piece of the company is valued separately, and then added together to
arrive at the total value of the company. The costs of duplicating or replacing the individual
components of the business are determined item by item, using special appraisal professionals
as needed. This method is generally only suitable for the appraisal of interests that have the
benefit of control; i.e., the interest being appraised has the ability and authority to make
decisions regarding the disposition or acquisition of assets and liabilities.
9524 E. 81st St. Ste. 1504B
Tulsa, OK 74133
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Table 7 ‐ Adjusted Book Value
FMV
Adjustment
11/30/2016
$
%
Notes
ASSETS
Current Assets
Cash
$
108,016
$
108,016
Accounts Receivable
$
36,153
$
36,153
8.3% Note 1
Inventory
$
35,003
$
35,003
8.0%
$
127,187
$
127,187
29.2%
TOTAL CURRENT ASSETS $
306,359
$
306,359
70.3%
(129,308) $
129,308
29.7% Note 2
Other Current Assets
24.8%
FIXED ASSETS
Property, Plant, & Equipment
$
Accumulated Depreciation
$
(220,521) $
Land
$
‐
TOTAL FIXED ASSETS $
258,615
38,094
$
$
220,521
$
91,214
$
‐
129,308
0.0%
29.7%
OTHER ASSETS
Other Assets
$
TOTAL ASSETS
$
‐
344,453
$
$
91,214
$
‐
435,667
0.0%
100.0%
CURRENT LIABILITIES
Notes Payable (Short‐term)
$
‐
$
‐
Accounts Payable
$
25,983
$
25,983
Other Current Liabilities
$
254
$
254
TOTAL CURRENT LIABILITES $
26,237
$
26,237
6.0%
$
10,953
2.5%
3.0%
6.0%
LONG TERM DEBT
Notes Payable
$
10,953
Shareholder Loans
$
2,164
TOTAL LONG TERM DEBT $
13,117
$
13,117
TOTAL LIABILITIES
$
39,354
$
39,354
Capital Stock
$
500
$
500
Distribution
$
(420,200)
Paid in Capital
$
40,341
Retained Earnings
$
564,728
Net Income
$
TOTAL EQUITY
TOTAL LIABILITIES & EQUITY
9524 E. 81st St. Ste. 1504B
$ (420,200)
‐96.4%
$
40,341
$
655,942
119,730
$
119,730
27.5%
$
305,099
$
396,313
91.0%
$
344,453
$
435,667
100.0%
$
$
91,214
91,214
Tulsa, OK 74133
9.3%
150.6% Note 3
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Note 1 – The analyst was not provided with an Accounts Receivable aging report. It is highly
unlikely that all of these receivables would be collected but without an aging report, the analyst
chose not to reduce the total.
Note 2 – The analyst did not have access to an asset appraisal. The analyst chose to value the
fixed assets at 50% of book value.
Note 3 – The net change in the value of the Assets is offset against Retained Earnings.
3.0 DETERMINATION OF DISCOUNT & CAPITALIZATION RATES
The discount rate was calculated using the Build‐Up Method. This is accomplished by starting
with a risk‐free rate of return on the date of the valuation, then adding an equity risk premium,
a benchmark premium for size, and other risk factors associated with the Company. In order to
determine the capitalization rate, a long term sustainable growth rate is deducted from the
discount rate.
The build‐up rate is displayed below:
Table 8 ‐ Capitalization Build‐Up Rate
RISK FACTOR SUMMARIZED
Risk Free Rate
Equity Risk Premium
Size Risk Premium
Industry Risk Premium
Final Company Specific Risk Premium
Estimated Discount Rate
Long Term Sustainable Growth Rate
After‐tax Net Cash Flow Capitalization Rate for Next Yr.
Tax Effect [1‐Tax Rate (40%)]
Pretax Net Cash Flow Capitalization Rate for Next Yr.
+
+
+
+
+
‐
÷
RISK RATES
2.73%
6.90%
5.30%
1.33%
2.24%
18.50%
2.00%
16.50%
60.00%
27.49%
Because the analyst used a pre‐tax economic benefit stream, the after‐tax capitalization rate
needed to be converted to a pre‐tax rate. This takes the inverse of the combined federal and
state income tax rate.
Had a complete analysis been performed, instead of a limited one, this rate may have been
different.
9524 E. 81st St. Ste. 1504B
Tulsa, OK 74133
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4.0 DISCOUNTS & PREMIUMS
The value estimates calculated by the Income Approach were based in large part on the
development of a capitalization rate, which was in turn derived from public data regarding
marketable (or “as if freely traded”) securities and other financial products. This public data
(primarily publicly traded stocks) has an element of liquidity that closely‐held shares do not
have. Therefore, in this case, a DLOM adjustment is required in order to restate the estimate of
value produced by the Income Approach on a non‐marketable basis.
In essence, impairment of liquidity (converting an interest in a closely‐held Company to cash or
a cash equivalent in three days) increases an investor’s expected rate of return because it either
increases the holding period of the investment, the cost to convert the investment to cash (or
its equivalent) or both. As a result, the market‐clearing price of a non‐marketable security is
discounted relative to the marketable value. The discount is generally expressed as a percent of
a marketable value and also referred to as a discount for lack of marketability.
There is no public market nor is there a secondary market for closely‐held companies or their
related interests. The inability to readily sell an interest increases the owner’s (or potential
owner’s) exposure to changing market conditions and increases their risk of ownership, or, said
from another perspective, it decreases the value of their investment. Accordingly, a
hypothetical buyer would typically demand a higher rate of return (through a lower price) in
comparison to similar but publicly traded interests, causing the privately‐held interest to trade
at values less (i.e., at a discount) than if they were publicly traded. The increase in return and
corresponding reduction in value (i.e., a DLOM) to compensate for lack of marketability is based
on the particular facts and circumstances that affect the interest being evaluated.
The analyst chose a 15% discount for lack of marketability for the Company.
The Market Approach reflects transactions in the IBA database that were used to calculate the
valuation multiples for the Company. These transactions are based on private Company
transactions (i.e., the acquired Company was a privately held Company). One of the
characteristics of these private Company transactions is that the illiquidity aspect (i.e., the time
it takes to find a buyer, agree on a price, and then complete the transaction) has already been
factored into the results by the actuality of the real transactions contained in the data base
used to determine an indicated value. The results in this case are therefore already stated and
represent a non‐marketable value (i.e., accounting for a reasonable time to realize the
estimated values). Therefore, a Discount for Lack of Marketability was not required for the
estimate of value derived using the Market Approach.
9524 E. 81st St. Ste. 1504B
Tulsa, OK 74133
918‐994‐2095
Green Country Business Valuations, LLC
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5.0 RECONCILIATION OF VALUES
The analyst was able to apply three methods across the two approaches to business valuation
in determining the value of a 100% interest in the Company. The 100% interest was valued on a
control, non‐marketable basis.
The analyst chose to give a 50% weighting to the Market Approach valuation. Within that, the
analyst chose to give equal weighting to the Sale Price as a percentage of Revenue and Sale
Price as a Multiple of Seller’s Discretionary Earnings. The analyst was comfortable with the
amount of transactions available and with the relative consistency across the many
transactions.
The analyst chose to give 50% weighting to the Income Approach. The most theoretically
correct method to determine the equity value is based on the income stream generated by the
Company because the hypothetical investor is focused on the availability of future income, its
predictability and the expected rate of growth. The analyst has reviewed the Company’s
performance and has a high level of confidence in the Company to continue to produce
consistent results.
The asset approach was not given any weighting in the final analysis. The lack of an asset
appraisal and not having access to an Accounts Receivable aging schedule did not give the
analyst comfort in valuing the balance sheet. As seen by the results found in the Market
Approach, the value of this business easily surpasses the net asset value of the business.
9524 E. 81st St. Ste. 1504B
Tulsa, OK 74133
918‐994‐2095
Green Country Business Valuations, LLC
www.greencountrybv.com
Table 9 ‐ Reconciliation of Indicated Values
VALUATION
METHODOLOGY
Market Approach
Direct Market Data
Method ‐ Price to
Revenue
Direct Market Data
Method ‐ Price to
SDE
Income Approach
Single Period
Capitalization
Method
Asset Approach
Net Asset Value
Method
Weighted
Indicated
Valuator
Portion of
Equity
Weighting by
Equity
Value
Method
Value
$ 501,000
25%
$ 125,250
$ 468,000
25%
$ 117,000
$ 349,000
50%
$ 174,500
$ 396,000
0%
Weighted Estimate
of Fair Market
Value
100%
ROUNDED
$ 416,750
$ 417,000
5.0 JUSTIFICATION FOR PURCHASE TEST
In order to further substantiate the value estimate that was determined for the COMPANY, the
analyst applied a justification for purchase test to simulate a transaction between a willing
buyer and a willing seller to determine whether the value that was derived could allow a
reasonable transaction to take place. In this instance, we assumed a 25% down payment with
financing at two points above the prime rate over a seven‐year period. Based on an operating
value of $417,000, this would indicate a down payment of $104,250 with financing of $312,750.
9524 E. 81st St. Ste. 1504B
Tulsa, OK 74133
918‐994‐2095
Green Country Business Valuations, LLC
www.greencountrybv.com
Table 10 ‐ Justification for Purchase Test
Sale Price
Down Payment
Financed Amount
Prime Rate Plus 2%
Loan Term (Years)
Growth Rate
$ 417,000
$ 104,250
$ 312,750
5.50%
7
2%
Annual Payments
Interest
YEAR
1
$55,033
$17,201
YEAR
2
$55,033
$15,121
YEAR
3
$55,033
$12,925
YEAR
4
$55,033
$10,609
YEAR
5
$55,033
$8,166
YEAR
6
$55,033
$5,588
YEAR
7
$55,033
$2,869
Principal
$37,832
$39,912
$42,108
$44,423
$46,867
$49,444
$52,164
Cash Flow
Pre‐tax Income
Less: Interest Expense
$105,123
($17,201)
$107,225
($15,121)
$109,370
($12,925)
$111,557
($10,609)
$113,789
($8,166)
$116,064
($5,588)
$118,386
($2,869)
Taxable Income
Less: Principal Payments
$87,922
($37,832)
$92,105
($39,912)
$96,445
($42,108)
$100,948
($44,423)
$105,622
($46,867)
$110,476
($49,444)
$115,517
($52,164)
Cash Flow
$50,090
$52,193
$54,337
$56,525
$58,756
$61,031
$63,353
48%
50%
52%
54%
56%
59%
61%
Return on Down Payment
This supports the reasonableness of the price determined for the Company.
The final calculation of value for the Company is $417,000.
Thank you for allowing us to assist you in this matter. Should you have any questions, please do
not hesitate to call us. Our limiting conditions are attached to this letter along with our
representations and qualifications, and should all be considered an integral part of this report.
Sincerely,
Lance LeBlanc, C.V.A.
Green Country Business Valuations, LLC
9524 E. 81st St. Ste. 1504B
Tulsa, OK 74133
918‐994‐2095
Green Country Business Valuations, LLC
www.greencountrybv.com
Statement of Assumptions and Limiting Conditions
1.
The conclusion of value arrived at herein is valid only for the stated purpose as of the
date of the valuation.
2.
Financial statements and other related information provided by the subject entity or its
representatives, in the course of this engagement, have been accepted without any verification
as fully and correctly reflecting the enterprise's business conditions and operating results for
the respective periods, except as specifically noted herein. Green Country Business Valuations,
LLC, has not audited, reviewed, or compiled the financial information provided to us and,
accordingly, we express no audit opinion or any other form of assurance on this information.
3.
Public information and industry and statistical information, if obtained, has been
derived from sources we believe to be reliable. However, Green Country Business Valuations,
LLC, makes no representation as to the accuracy or completeness of such information and has
performed no procedures to corroborate the information.
4.
This report and the conclusion of value arrived at herein are for the exclusive use of
Green Country Business Valuations, LLC’s client for the sole and specific purpose as noted
herein. It may not be used for any other purpose or by any other party for any purpose.
Furthermore, the report and conclusion of value are not intended by the author and should not
be construed by the reader to be investment advice in any manner whatsoever. The estimate
of value represents the considered opinion of Green Country Business Valuations, LLC, based on
information furnished to me by Happy State Bank and other sources.
5.
Neither all nor any part of the contents of this report should be disseminated to the
public without the prior written consent and approval of Certified Valuation Analysts.
6.
No change of any item in this calculation report shall be made by anyone other than
Certified Valuation Analysts, and we shall have no responsibility for any such unauthorized
change.
7.
Unless otherwise stated, no effort has been made to determine the possible effect, if
any, on the subject business due to future Federal, state or local legislation.
8.
Unless otherwise informed or determined independently by Certified Business Analysts,
it is assumed that the underlying assets will not operate in violation of any applicable
government regulations, codes, ordinances, or statutes. Green Country Business Valuations,
LLC, also assumes that, unless otherwise informed or determined independently, the subject
9524 E. 81st St. Ste. 1504B
Tulsa, OK 74133
918‐994‐2095
Green Country Business Valuations, LLC
www.greencountrybv.com
business is in compliance with all federal, state and local laws and regulations, as well as up to
date regarding filing and reporting requirements.
9.
If prospective financial information approved by the Client and/or the Company has
been used in our work, Green Country Business Valuations, LLC, has not audited, reviewed, or
compiled the prospective financial information and therefore, does not express an audit
opinion or any other form of assurance on the prospective financial information or the related
assumptions. Events and circumstances frequently do not occur as expected and there will
usually be differences between prospective financial information and actual results, and those
differences may be material. Green Country Business Valuations, LLC, does not provide any
assurance on the achievability of forecasts provided. Achievement of the forecasted results is
dependent on actions, plans, and assumptions of management.
10.
The conclusion of value is based on the stated definition of value. An actual transaction
involving the business, the business ownership interest, the security, or the intangible asset
may occur at a higher or lower value, depending on the circumstances surrounding the
business, the business ownership interest, the security, or the intangible asset, and the
motivations and knowledge of both the buyers and sellers at that time. Green Country Business
Valuations, LLC, makes no guarantees about what values individual buyers and sellers may
reach in an actual transaction.
11.
The conclusion of value reflects facts and circumstances existing as of the valuation
date. Except as noted, Green Country Business Valuations, LLC, has not considered subsequent
events and we have no obligation to update our calculation for such events.
12.
Green Country Business Valuations, LLC, assumes there are no other hidden or
unexpected conditions of the entity that would adversely affect value, other than those
indicated.
13.
No opinion is intended to be expressed for matters that require legal or other
specialized expertise, investigation, or knowledge beyond that customarily employed by
valuation specialists valuing a business, a business ownership interest, security or tangible
asset.
14.
Green Country Business Valuations, LLC, has not knowingly withheld or omitted
anything from our calculation that would affect the calculated value.
9524 E. 81st St. Ste. 1504B
Tulsa, OK 74133
918‐994‐2095
Green Country Business Valuations, LLC
www.greencountrybv.com
Valuation Analyst Representation
1. The statements of fact expressed herein are true and correct to the best of the analyst’s
knowledge and belief.
2. The reported analyses, opinions, and conclusions are limited only by the reported
assumptions and limiting conditions, and is the analyst’s personal, impartial, unbiased
professional analyses, opinions, and conclusions.
3. Neither the analyst nor any employee of Green Country Business Valuations, L.L.C. have any
present or prospective interest in the business that is the subject of this report, nor any
personal interest with respect to the parties, nor any other interest or bias which would impair
a fair and unbiased appraisal.
4. Compensation paid to the analyst for this appraisal is independent of the value reported and
is not contingent on the development or reporting of a predetermined value or direction in
value that favors the cause of the client, the amount of the value opinion, the attainment of a
stipulated result, or the occurrence of a subsequent event directly related to the intended use
of the appraisal.
5. The analyst has made a personal inspection of the subject business.
6. The valuation engagement was performed in accordance with the National Association of
Certified Valuation Analyst's Professional Standards.
7. No person except the undersigned participated materially in the preparation of this report.
PROFESSIONAL QUALIFICATIONS OF ANALYST
Lance LeBlanc is a Certified Valuation Analyst accredited by the National Association of Certified
Analysts and Analysts (NACVA). He is currently the president of Green Country Business
Valuations, COMPANY. His specialties include valuations as well as mergers & acquisitions.
Previous, Mr. LeBlanc has worked for a boutique investment banking firm, a regional bank, a
Fortune 500 Company, and a construction material supplier.
Mr. LeBlanc graduated from the University of Oklahoma in Norman in 1993 earning a Bachelor
of Business Administration degree in Finance.
9524 E. 81st St. Ste. 1504B
Tulsa, OK 74133
918‐994‐2095