1. InKnowVision’s Monthly
HNW Webinar Series
Technical Webinar
©2012. InKnowVision LLC. All rights reserved. www.inknowvision.com

2. Going Bananas Case Study
A presentation by Mary Warmus, CPA, MBA, ASA

3. The Life Cycle of the Business
 Dictates what Valuation Methodologies to use.
 Impacts model assumptions in the DCF and the
selection of multiples in the Market Approach.
 Exposes the risk posture of the client.
 Emphasizes the need for long-range strategic
planning.
 Impacts the clients need for a valuation and other
services.
 Dictates a client’s timeline for Exit.
 Highlights the need for a team of trusted
business advisors.
Next slide provided by attorney, Felix Gonzalez of the Archer Law Group
KENSINGTON FINANCIAL CONSULTANTS,
INC Copyright 2012

5. Going Bananas nd Produce Company
Balance Sheet
As of December 31, 2010
ASSETS LIABILITIES AND CAPITAL
CURRENT ASSETS CURRENT LIABILITIES
Cash $ 1,000,000 Accounts Payable $ 2,950,000
Accounts Receivable 13,500,000 Other Accrued Liabilities 75,300
Inventory 2,200,000 Current Portion of Long Term Debt 85,000
Prepaid Expenses 125,600 Line of Credit 1,250,000
Shareholder Loans 25,000 TOTAL CURRENT LIABILITIES 4,200,000
Other Receivables 10,000
Misc Other Assets 5,000
TOTAL CURRENT ASSETS 16,865,600 LONG TERM LIABILITIES
Mortgages Payable 2,500,000
PROPERTY AND EQUIPMENT TOTAL LONG TERM LIABILITIES 2,500,000
Property & Equipment 7,500,000
Accum Depr (5,625,000)
Total Property & Equip (net) 1,875,000 TOTAL LIABILITIES 6,700,000
OTHER ASSETS - Land 350,000 TOTAL CAPITAL 12,390,600
TOTAL ASSETS 19,090,600 TOTAL LIABILITIES AND CAPITAL 19,090,600

6. Discounted Cash Flow Analysis -Base Case
Terminal
Description 2010A 2011 2012 2013 2014 Year
Revenue 125,000,000 135,000,000 143,100,000 150,300,000 154,900,000 158,772,500
Less: Cost of Goods Sold:
Cost of Sales 102,500,000 110,700,000 117,342,000 123,246,000 127,018,000 130,193,450
Depreciation 250,000 225,000 202,500 182,250 164,025 147,623
Freight Out 5,000,000 5,400,000 5,724,000 6,012,000 6,196,000 6,350,900
Total Cost of Sales 107,750,000 116,325,000 123,268,500 129,440,250 133,378,025 136,691,973
Gross Profit 17,250,000 18,675,000 19,831,500 20,859,750 21,521,975 22,080,528
Selling General & Administrative Expenses:
Depreciation & Amortization (b) 93,750 84,375 75,938 68,344 61,509 55,358
Operating Expense 9,750,000 10,042,500 10,343,775 10,654,088 10,973,711 11,302,922
Operating Income 7,406,250 8,548,125 9,411,788 10,137,318 10,486,755 10,722,247
Other Income - - - - - -
EBIT 7,406,250 8,548,125 9,411,788 10,137,318 10,486,755 10,722,247
Income Tax @ 39% (3,333,800) (3,670,600) (3,953,600) (4,089,800) (4,181,700)
Net Income 5,214,325 5,741,188 6,183,718 6,396,955 6,540,547
Plus: Depreciation and Amortization 309,375 278,438 250,594 225,534 202,981
Less: Working Capital Additions - (6% of Change in
Sales) (600,000) (486,000) (432,000) (276,000) (232,400)
Operating Cash Flow 4,923,700 5,533,625 6,002,312 6,346,489 6,511,128
Less: Capital Expenditures (300,000) (275,000) (250,000) (225,000) (200,000)
Free Cash Flow 4,623,700 5,258,625 5,752,312 6,121,489 6,311,128
Capitalized Residual Cash Flow 60,105,979
Discount Factor - (WACC - 13%) 0.9407 0.8325 0.7367 0.6520 0.6520
Discounted Cash Flow 4,349,600 4,377,800 4,237,900 3,991,000 39,187,100

7. DCF Value Conclusion –
Base Case
Fair Market Value - Business Enterprise(C Corp) Control
Basis 56,143,400
Plus: Non-operating Assets - Excess Working Capital 5,165,600
Less: Debt (3,835,000)
Fair Market Value - Equity (Control, Marketable Basis) 57,474,000
Plus: S Coproration Premium - 15% 8,621,100
FMV - S Corporation Basis (Control, Marketable) 66,095,100
Less: Minority Discount - 24% (13,793,760)
FMV - Minority Non-Marketable Basis of Going Bananas 43,680,240
Less: Marketability Discount - 35% (15,288,084)
FMV - Minority Non-Marketable Basis of Going Bananas 28,392,156
Rounded to… 28,392,000
Notes:
a) Forecast based on Client Analysis - Assumes new growth areas in prepared fruits/salad kits & enhanced market share
b) Operating expenses and depreciation charges based on historical performance.
c) Discount Factor assumes Mid-Year Convention
d) Excess working capital defined as (Current Assets-Current Liabiliites) determined with reference to historical average.
e) This analysis was prepared for purposes of this valuation calculation and should not be used for any other purpose.
f) Long run inflation rate assumed to be 2.5%.

8. Going Bananas
Weighted Average Cost of
Capital
Cost of Equity Capital (Buildup
Method):
20-year US Treasury bond yield as of
Risk-free rate of return 4.13% 12/31/10
Long-term equity risk SBBI Valuation Edition 2011
premium 6.70% Yearbook
SBBI Valuation Edition 2011 Yearbook -
Size premium 6.28% 10th decile
Unsystematic risk premium
SBBI Valuation Edition 2011
Industry risk premium -1.55% Yearbook
Company risk premium 2.00% Estimate
Total equity rate 17.56%
Cost of Debt Capital
Prime rate at 12/31/10 was 3.25% per Federal Reserve
Average cost of debt 3.25% Bank of St. Louis
Tax rate 39.00% Estimated Federal and State
After-tax debt rate 1.98%
Capital Structure
Equity/invested capital 70.00%
Debt/invested capital 30.00%
Total invested capital
WACC (Rounded) 13.00%
Source
http://www.federalreserve.gov/releases/H15/da
ta.htm
KENSINGTON FINANCIAL CONSULTANTS,
INC Copyright 2012

9. Some Factors Considered for Risk Assessment
Intense competition can adversely affect market participant’s financial
performance.
Food distribution businesses are highly competitive and are characterized by
high inventory turnover, narrow profit margins and increasing consolidation.
The Company Produce competes not only with local, regional and national food
distributors, but also with vertically integrated national and regional chains that
employ a variety of formats, including supercenters, supermarkets and warehouse
clubs.
Many of The Company’s food distribution competitors are substantially larger
and may have greater financial resources and geographic scope, lower
merchandise acquisition costs and lower operating expenses, intensifying
price competition at the wholesale and retail levels. Industry consolidation
and the expansion of alternative store formats, which have gained and
continue to gain market share at the expense of traditional grocery stores,
tend to produce even stronger competition for both retail and food
distribution segments. Failure to implement strategies to respond to these
competitive pressures, can negatively impact operating results through adverse
affects on pricing (reductions), decreased sales or margins, or loss of market share.
Wholesale bypass is threatening food wholesaler’s existence. The main factor
that has undermined industry revenue growth is the increasing trend of wholesale
bypass. Retailers aim to source produce as cheaply as possible, which in some cases
leads them to undertake their own sourcing activities.

10. DCF Assumptions – Case Changes
BASE Case 2 Case 3
WACC 13% 14% 13%
Risk Average More Average
Revenue Growth 8% to 2.5% 8% to 2.5% 5% to 2.5%
Gross Margin 82% 82% to 80% 82%
Fair Market Value (1) $ 28,392,000 $ 33,104,000 $ 25,021,000
(1) S Corp Basis, Minority, Non-Marketable Basis
KENSINGTON FINANCIAL CONSULTANTS,
INC Copyright 2012

11. Publicly Traded Guideline Companies
•Nash-Finch Foods
Nash-Finch Company operates as a wholesale food distributor in the
United States. The company's Military segment distributes grocery
products to the United States military commissaries and exchanges in
the United States and the District of Columbia, Europe, Puerto Rico,
Cuba, the Azores, and Egypt.
•United Natural Foods
United Natural Foods, Inc. is a national distributor of natural, organic
and specialty foods and non-food products in the United States and
Canada. The company operates through three operating divisions:
Wholesale, Retail and Manufacturing.
•Spartan Stores
Spartan Stores, Inc. operates as a grocery distributor and retailer
principally in Michigan and Indiana. The company operates in two
segments, Distribution and Retail.
•Core-Mark Holding Company
Smokes and snacks are at the center of Core-Mark Holding's cosmos.
The company distributes packaged consumables (including cigarettes
and other tobacco products, candy, snacks, grocery items, perishables,
nonalcoholic beverages, and health and beauty aids) to about 26,000
convenience stores; mass merchandisers; supermarkets; and drug,
liquor, and specialty retailers.

12. Mergerstat: Size Premiums
Small vs. Large Companies: Median P/E's Offered
Size Total # Median
Year P/E > $100MM P/E < 25MM Discount Transactions P/E All
2006 22.8 17.6 22.8% 464 26.1
2007 23.9 21.2 11.3% 498 28.8
2008 23 8.9 61.3% 289 21.7
2009 18.4 8.5 53.8% 210 20.7
2010 21.8 9.2 57.8% 301 24.4
Average - 5 Years 41.4% 24.3
Source: Mergerstat 2011 for transactions 2010 and prior. Pages 20-21
KENSINGTON FINANCIAL CONSULTANTS,
INC Copyright 2012

13. Guideline Publicly Traded Company Method
Multiples of Revenues and EBITDA
LTM Most
Revenues Ending Recent MVIC MVIC/REV MVIC/EBITDA
Company $000 (FYE 0) $000 LTM LTM
NASH-FINCH $4,991,979 2010/12 2010/12 $ 810,136 0.2 6.1
UNITED NATURAL FOODS 3,925,338 2010/10 2010/07 1,965,413 0.5 13.4
SPARTAN STORES 2,520,370 2010/12 2010/03 558,659 0.2 5.5
CORE-MARK HOLDING COMPANY 7,266,800 2010/12 2010/12 402,995 0.1 7.5
LOW LOW 0.1 5.5
HIGH HIGH 0.5 13.4
MEAN MEAN 0.2 8.1
MEDIAN MEDIAN 0.2 6.8
Selected Multiple (1) 0.4 8.1
Size Adj - 41.4% (2) (0.2) (3.4)
Adjusted Multiple
(Min/Mkt) 0.2 4.7
Control Premium -
42.5% (3) 0.1 2.0
Adjusted Multiple
(Control/Mkt) 0.3 6.8
NOTES:
(1) Multiple as if freely traded - minoirty, marketable value indication
(2) Mergerstat discount for size - 5 year Average
(3) Mergerstat control premium - 5 year Average
KENSINGTON FINANCIAL CONSULTANTS,
INC Copyright 2012

14. Guideline Company Method
GOING BANANAS GUIDELINE COMPANY APPROACH
Sales EBITDA
Going Bananas 12/31/10 Cash Flows: 125,000,000 7,750,000
Selected Multiple 0.20 6.80
Indicated BEV- Control, Marketable 25,000,000 52,700,000
Plus: Excess WC 5,165,600 5,165,600
Less: Debt (3,835,000) (3,835,000)
Total Equity Value - Control, Marketable 26,330,600 54,030,600
Adjustment: S Corp. Premium - 15% 3,949,590 8,104,590
FMV Equity - Control, Marketable 30,280,190 62,135,190
Less: Minority Discount - 24% (7,267,246) (14,912,446)
FMV Equity - Minority, Marketable (1) 23,012,944 47,222,744
Less: Marketability Discount - 35% (8,054,531) (16,527,961)
FMV Equity - Minority, Non-Marketable (2) 14,958,414 30,694,784
Source: Guideline Public Companies
KENSINGTON FINANCIAL CONSULTANTS,
INC Copyright 2012

15. Market Transaction Method using Pratt Stats
Transactions: Food Distributors for SIC 5141
N Market Value of
o Business Description Invested Capital Sale Date Net Sales MVIC / Sales MVIC / EBITDA
1Food Distributor to Philadelphia Suburbs $325,000 7/16/2007 $2,486,930 0.13 3.42
2Distributor of Food Products $1,500,000 5/11/2007 $6,662,285 0.23 N/A
4Wholesale of Produce $240,000 1/31/2007 $1,485,722 0.16 2.44
5Wholesale Produce $65,000 7/19/2009 $1,328,991 0.05 1.10
6Food distributor $510,000 10/1/2009 $1,265,000 0.40 N/A
7Food Wholesaler $60,000 3/29/2010 $2,883,801 0.02 4.67
8Fresh Produce Wholesaler: Selling to Restaurants $2,000,000 10/1/2009 $10,138,000 0.20 3.17
9Food Distributor to Foodservice and Retail Customers $89,299,000 4/28/2008 $158,461,414 0.56 9.76
AVG 0.22 4.09
MED 0.18 3.29
HIGH 0.56 9.76
LOW 0.02 1.10
Source: PrattStats Copyright © 2011 Business Valuation Resources, LLC. All rights reserved. www.BVResources.comSM

16. Market Transaction Method
GOING BANANAS PRIVATE TRANSACTIONS METHOD
Stats
Sales EBITDA
Going Bananas 12/31/10 Cash Flows: 125,000,000 7,750,000
Selected Multiple 0.23 3.62
Indicated BEV- Control, Marketable 28,430,556 28,070,500
Plus: Excess WC 5,165,600 5,165,600
Less: Debt (3,835,000) (3,835,000)
Total Equity Value - Control, Marketable 29,761,156 29,401,100
Adjustment: S Corp. Premium - 15% 34,225,329 33,811,265
FMV Equity - Control, Marketable 63,986,484 63,212,365
Less: Minority Discount - 24% (15,356,756) (15,170,968)
FMV Equity - Minority, Marketable (1) 48,629,728 48,041,397
Less: Marketability Discount - 35% (17,020,405) (16,814,489)
FMV Equity - Minority, Non-Marketable (2) 31,609,323 31,226,908
Source: Pratt Stats

17. Going Bananas
Value Summary
Income Approach - Discounted Cash Flow Method Market Approach
Public Guideline
BASE Case 2 Case 3 Co. Transactions
WACC 13% 14% 13%
Risk Average More Average
Revenue Growth 8% to 2.5% 8% to 2.5% 5% to 2.5%
Gross Margin 82% 82% to 80% 82%
$
Fair Market Value (1) 28,392,000 $ 33,104,000 $ 25,021,000 $ 30,695,000 $ 31,500,000
(1) S Corp Basis, Minority, Non-Marketable Basis
KENSINGTON FINANCIAL CONSULTANTS,
INC Copyright 2012