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Petitioner claims that after analyzing the projections on an
equity and cash basis, he concluded that the economics of the
transaction made sense.
Petitioner explained his consideration of the fair market
value of the Sentinel EPE recycler as follows:
When I looked at the price of the machine and the
business deal, I looked at it as a business deal. From
a business perspective, * * * it's not just the price
of the machine. It's really the price of the business
deal, of which the machine is one part of it.
* * * * * * *
So, when you looked at it, you didn't look at it
to see whether or not it costs $50,000 or $100,000 to
build the machine. You looked to see whether or not
the overall economics justified that kind of investment
and made sense.
So it was really a systems, or a group look at the
whole thing.
When asked for his assessment of the fair market value of the
machine, petitioner replied: "As part of the overall system, it
was worth the million dollars that was in the prospectus."
However, petitioner claimed that he could not properly place a
value on the Sentinel EPE recycler if considered in isolation
from "the overall system".
Price difficulties arose soon after petitioner invested in
Northeast. He recalled that even though the price of crude oil
continued to rise during the latter part of 1981 and into the
next year, the price of low density polyethylene actually
decreased. Petitioner visited PI to inquire about the machines
during his summer vacation trips to Cape Cod, but became "very
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