- 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 Next
Last modified: May 25, 2011