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sufficient cash-flow existed to warrant allocation of income to
the trademark. He used financial information and projections
that came from petitioners and their advisers, some of which were
adjusted from yearend to the valuation date on July 9, 1990.
Then, he made adjustments for taxes, using a 30-percent rate
worldwide and adjustments for capital expenditures (5 percent of
revenues) and depreciation and amortization (3 percent of
revenues). Finally, networking capital additions were projected
at 10 percent of incremental revenues in each projection year.
He then proceeded to determine the fair market value of the DHL
network as the sum of the present values of the available cash-
flows in the projection period plus the present value of cash-
flows expected beyond the projection period at a 6-percent growth
rate. Finally, he capitalized the “residual period cash flow”
using a 12.5-percent discount rate. That computation resulted in
a 1990 total asset value of all DHL companies of $1.2 billion,
equity of $630 million, and an amount that was attributed to
intangible assets of $520 million.
There is no question that the DHL network was successful and
that it had value over and above the shareholder equity.
Although certain of respondent’s expert’s assumptions were
generous and resulted in the inflation of value, overall we can
accept that there was a reasonably large amount of value in
excess of the equity reflected in the network entities. The more
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