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deduct the related earnings, with an appropriate tax adjustment, from reported earnings Dividends must also be adjusted Value the company as though it did not own the nonoperating assets It is then necessary to determine the appropriate increment to the value of the stock determined on an operating basis If the nonoperating assets are securities, the best procedure is that recommended for an investment company [see Subsection 443(d)] Similarly, if such assets are real estate, the procedure used in valuing a minority interest in a real estate company is appropriate (g) LIFE INSURANCE PROCEEDS In valuing common stock for estate tax purposes, it is necessary to re ect any windfall to the company arising from any life insurance on the deceased This may be done by considering the company s improved nancial position and its higher earning power related to the proceeds If the proceeds result in a level of cash beyond the needs of the business, then the excess should be treated as a nonoperating asset, as reviewed above If the deceased was a key man, it may be necessary to apply a special discount to re ect the higher risk related to his loss (h) COMPANIES WITH AN EXTREMELY STRONG FINANCIAL POSITION A company with an extremely strong nancial position can present a particular valuation problem An example is a real estate company with no long-term debt The publicly held companies that might be used for comparative purposes, without exception, have large amounts of long-term debt outstanding Thus any price-earnings ratio or price-net asset value ratio that can be derived from them re ects the way in which the investing public values a real estate company with signi cant leverage An appraiser might approach this problem in the usual way and then adjust the valuation ratios derived from publicly held real estate companies to re ect the superior nancial position of the subject company However, the in uence of the appraiser s judgment can be minimized by changing to the total invested capital technique, to quantify better the effect of extreme superiority in nancial position In employing the total invested capital technique, the total market value of all preferred and common stock is combined with the total market value of all the outstanding long-term debt of each of the guideline companies That represents the total market value of the total invested capital That amount is then related to the book value of that total invested capital (net worth plus long-term debt), adjusted for underlying asset values in the case of real estate companies Similarly, the total market value of the total invested capital is related to the earnings available for that total invested capital (net income plus interest on long-term debt), to the cash ow available for that invested capital (net income plus noncash charges, plus interest on long-term debt), and nally to the earnings paid out on that total invested capital (dividends plus interest on long-term debt) The application of these ratios to a company with a decidedly stronger nancial position is recommended when the company being valued is stronger than the guideline companies by a very wide margin, a circumstance that tends to occur in the valuation of real estate companies but may be encountered in the valuation of an industrial company One important drawback of this technique should be oted It is necessary to ascertain the market value of the long-term debt of the guideline companies and, when the debt is not publicly traded, it is necessary to estimate its market value This introduces an element of judgment that the basic procedure does not entail (i) PREFERRED STOCK features: A standard preferred stock is a security that has the following seven. c# code to compress pdf file C# How to compress PDF images in C# for Visual Studio 2013
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