Opinion ID: 2226595
Heading Depth: 1
Heading Rank: 8

Heading: Shahon's Testimony on Loss of Value

Text: In addition to exhibit 180 and Northwall's corresponding foundational testimony, World Radio also offered the testimony of Shahon. Having considerable experience in dealing with electronic retail businesses going public, Shahon testified as to the value of World Radio as of June 1985. Before arriving at her opinion of World Radio's value in June 1985, Shahon first examined information on seven consumer electronics companies that had gone public. Shahon determined that five of these seven companies were relevant to a determination of the price/earnings ratios of World Radio. A price/earnings ratio represents the price a company is selling for in the marketplace divided by its earnings per share. In other words, the marketplace value of a company can be determined by multiplying that company's price/earnings ratio by its earnings. According to Shahon, the price/earnings ratios of the five pertinent companies for the first 5 months of 1985 varied from as high as 20.38 to as low as 11.11. For Shahon's evaluation of World Radio, she selected a narrower and more conservative range of price/earnings ratios of 11 to 16. Therefore, Shahon multiplied World Radio's 1985 earnings, as shown on exhibit 180, by these ratios. As such, Shahon testified that assuming the numbers contained on Exhibit 180 had been the case, World Radio was worth between $8 million and $11 million on June 1, 1985. Shahon also testified that World Radio's negative actual worth of $248,164, as disclosed by its June 1, 1985, balance sheet, made World Radio virtually worthless. In addition to evidence on the issues of lost profits and loss of value, evidence was also presented showing that World Radio had paid Coopers & Lybrand accounting fees in the amounts of $13,000, $14,000, and $15,000 for 1982, 1983, and 1984, respectively.