- 15 -
Under the income approach, the gross values of reproduction
timber and bare land were determined as they were for the
comparable sales approach. The merchantable timber component,
however, was adjusted for time (by applying an interest rate of
8.5 percent) and profit and risk (10 percent of net stumpage
value). An income ratio was then calculated for each tract by
dividing the component value of merchantable timber as adjusted
for time and profit and risk by the gross component value of
merchantable timber. The income ratios for each tract as
determined by Mr. Prochnau ranged from .7124 to .8618, indicating
a discount between 13.82 and 28.76 percent. The income ratios
were then applied to the reproduction timber and bare land
components, and the product was added to the adjusted
merchantable timber value, yielding a total indicated value of
$63,092,357 under the income approach.
Mr. Prochnau based his final conclusion of $63.5 million on
the indicated values under both the comparable sales and income
approaches.
Overall, the parties’ experts used similar approaches in
valuing the timber and timberland. Where the experts differ
primarily is in their calculation of logging costs, the discount
applied to the gross value of the subject property, the treatment
of reproduction timber, and the amount of property that has a
higher and better use, and thus a higher value, than timberland.
Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 NextLast modified: May 25, 2011