Epco, Inc. and Subsidiaries - Page 16




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          over time; (2) Mr. Jones applied a discount rate that is                    
          unrelated to the original transaction, circumstances, or original           
          parties; and (3) Mr. Jones characterized the construction of the            
          sewer line as a "bad investment" and contended that cost overruns           
          made the cost method approach to valuation inappropriate to this            
          sewer line.                                                                 
               Mr. Jones argues that the application of respondent's method           
          of valuation is inaccurate in this case because it values the               
          funds in escrow as of 1989, the date the funds became totally               
          available to petitioner.  Mr. Jones contends that if the escrow             
          amounts were to enter into the valuation at all, the funds should           
          be discounted as though the funds represented actual customer               
          tap-on fees to be paid to petitioner over a course of years.                
               We do not agree.  The escrow funds were available and used             
          for construction of the sewer line in 1988 and 1989 without                 
          waiting for Brookshire customers to be "on-line".  The sewer line           
          was fully completed and operational as of April 1989.                       
               Mr. Jones also applied a 22-percent discount rate to the               
          sewer line income as the rate a willing buyer or investor would             
          expect because of the risk of this type of investment.  Mr.                 
          Jones' application of a 22-percent discount rate follows from               
          several assumptions that have no foundation in the record, and we           
          remain unconvinced that the application of a 22-percent discount            







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