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timberland containing about 422,523 MBF of merchantable timber as
of December 20, 1985, and concluded that the market value of the
property was $63.5 million. Mr. Prochnau first divided the
timberland into six smaller parcels based on geographic location
and market access. His rationale for doing so was: (1) To
attract buyers who are interested in specific income property or
may be incapable of financing the purchase of larger properties,
(2) to liquidate the property quickly, and (3) to maximize sales
revenue (smaller units reduce the discount related to the
wholesale nature of larger sales). Mr. Prochnau then applied a
valuation methodology similar to that of Mr. Granvall. He
estimated the value of each component (i.e., merchantable timber,
reproduction timber, and bare land) and multiplied the total by a
ratio to arrive at the total market value.
In estimating the value of merchantable timber, which he
defined as softwood stands 50 years and older and hardwood stands
40 years or older, Mr. Prochnau used published price quotes and
contract sales prices to arrive at an average9 delivered log
price of $199.82/MBF. He then subtracted the following average
logging costs:
9The average amounts of delivered log prices and logging
costs are spread over only five of the six parcels of timberland,
because tract number six contained no merchantable timber.
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