Good evening,

I have a question regarding an exercise in my Forensic Accounting course. What are the steps when calculating the value of the an interest of a retiring employee? Does it matter in which order you calculate the steps? For example, these are the steps I will be using:

1. Calculate the weighted average income (Weighted Avg income / Weight)
2. Calculate the valuation of the company (Avg weighted income x Price earnings ratio)
3. Calculate the loss of key employee (10% x Valuation of the company)
4. Calculate the minority interest discount (30 % x Valuation of the company after loss of employee %)
5. Calculate the value oft he retiring employee (Valuation of the company after loss of key employee and minority interest discount x 12%)

Are these correct? Should I calculate the discount for the loss of a key member and for the minority interest before multiplying by the Price-earnings ratio? If so, why?

Thank you very much. Your help is greatly appreciated!