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the discounted cash-flow method, calculating the net present
value and future earnings of Brookshire and the return on
investment using a 9-percent rate of return; (3) the
capitalization of dividends method, using a 1.8-percent yield
rate; and (4) the capitalization of earnings method, using a 7-
percent current-year capitalization rate. Respondent’s expert
also applied a discount of 34 percent to reflect the lack of
marketability of the stock.
Respondent's expert overstates the value of the Brookshire
common stock because of his use of three companies as comparable
companies that have significant sales in markets other than
retail grocery and that are not comparable to Brookshire. The
use of these companies distorts each of the valuation methods
used by respondent's expert.
Respondent's expert also overstates the value of Brookshire
common stock because he does not take into account Brookshire's
loss of profits apparently caused by increased competition from
Wal-Mart SuperCenters.
Petitioner's second expert relies on the sale of small
blocks of Brookshire common stock that occurred in years prior to
decedent’s date of death and that constituted non-arm’s-length
sales.
In analyzing the economic outlook as of the date of
decedent’s death, petitioner's experts properly considered not
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