Pope & Talbot, Inc., & Subsidiaries - Page 15

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               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.            






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Last modified: May 25, 2011