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Gross used a cost savings approach; in other words, "the
calculation of the benefit derived from the research performed
and conversion of that savings into a value amount." Gross
classifies this approach as in a broad category of an income
approach. According to Gross, for the cost savings approach, he
valued as of December 31, 1986, the discoveries made from the
cost savings that he calculated.
For his cost savings approach, Gross relied on Eberhardt's
conclusion that the leaf tissue analyses performed by IAS for HJI
indicated that the amount of nitrogen and phosphate routinely
being applied to the jojoba plants on Turtleback I was not
justified. Gross calculated the savings from not applying the
unneeded fertilizer to be $38 savings per acre, based on $26 of
savings per acre for nitrogen and $12 per acre for phosphate. He
then used a 10-percent capitalization rate to determine a total
per acre savings value of $380 from not applying unnecessary
nitrogen and phosphate.
In his report, Gross opined that:
It is not customary to conduct expensive research and
experimentation on a pilot model, and then expect the
pilot operation to provide for recovery of such
expense. Rather, the discoveries derived from research
and experimentation performed at a relatively small
cost on a pilot model are thereafter utilized in large-
scale production to produce large-scale cost savings.
Gross consequently concluded that the value of the discoveries in
1986 from the nutrient tests were most applicable to a large
producer of jojoba. He estimated that such a major jojoba
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