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Value of Tri-Power's Reserves
Respondent contends that petitioner paid more for Tri-Power
than its assets were worth. Both parties presented expert
witness testimony concerning the value of the Tri-Power reserves.
It is well established that we may accept or reject expert
testimony according to our own judgment, and we may be selective
in deciding what parts of an expert's opinion, if any, we will
accept. See Helvering v. National Grocery Co., 304 U.S. 282, 295
(1938).
Respondent's experts estimate the fair market value of the
Tri-Power reserves, at the time of the acquisition, to be in the
range of $4.1 million to $6.2 million. Petitioner's expert
estimates the fair market value of the Tri-Power reserves, at the
time of the acquisition, to be in the range of $11.6 million to
$13 million. The 1986 LAM updated reserve report estimated the
future net revenue from the Tri-Power reserves to be
approximately $19.1 million, using a discount factor of 10
percent. Respondent contends that the fair market value
estimated by petitioner's expert and the estimated future net
revenue estimated by LAM in the 1986 LAM updated reserve report
are overstated because they (1) are based on overstated reserve
estimates, (2) employ an overly optimistic price forecast to
project the future cash-flows anticipated from the reserves, and
(3) used an improper discount factor to discount the estimated
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