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does not contain an explanation of the reason the implied 33-
percent royalty rate (for name only in the Aryaduta transaction)
was selected over the implied 25-percent rate for trade names,
marks, and chain services (HESA). The BVS report merely contains
the statement that:
A royalty rate of 33% was found to have still allowed
both HHK and HS to produce a very high return on assets
and high overall profitability. A royalty rate as high
as 50% could have been supported in certain periods.
In support of its approach on the profit split, BVS stated
that:
The approximately 50% split in the net revenue of HESA
provides a guideline uncontrolled transaction that
suggests that, at most, HHK and HS would have been
entitled to half of the value of their respective
adjusted operating incomes after royalties. * * *
For HHK, BVS used a 65-percent split, to be allocated to HIC for
the years 1976 through 1981, with 50 percent for the remaining
years. For HS, BVS used a 75-percent split for 1976, 65-percent
for 1977 through 1982, and 50-percent thereafter.
These profit splits, according to respondent’s expert,
recognized HIC’s contribution of intangibles. We note that was
also one of the purposes of the 33-percent royalty. BVS
references the split as being “approximately 50%,” but it
actually used 75, 65, and 50 percent (depending on the specific
year). These percentages more closely resemble the consulting
fee paid by HESA to HHK, which we have found to be an arrangement
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