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with one or more other income methodologies, in these cases the
relief-from-royalty approach.
Our analysis of this expert’s approach reveals little
difference in methodology or approach from that used by
respondent’s expert who relied solely on the relief-from-royalty
approach. The distinctions that made a difference between the
first expert’s $287 million value and this expert’s $327.5
million value for 1990, for the most part, are attributable to a
somewhat different choice of assumptions. To reach $327.5
million, this expert used a 3.6-percent long-term growth rate, a
30-percent tax rate, a 12.21-percent discount rate, and a 1.15-
percent royalty rate.
Petitioners’ valuation expert, as a premise for his
valuation, accepted as a fact or used as a base “(1) licenses
actually granted by * * * [DHL] and DHLI; and (2) the arm’s-
length negotiation that resulted in an established royalty in
* * * [the parties’ agreements].” So, for example, he accepted
the .75 percent royalty rate that was to begin in 2007 after the
end of the 15-year royalty-free period. He also accepted as fact
or a basis for his valuation that DHL and DHLI had never required
a royalty in their relationship. Because we have already found
that these transactions were not necessarily in all respects at
arm’s length, petitioners’ expert’s approach is flawed in its
premises.
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