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future cash-flow to its present value. Respondent contends that
the proper discount factor is 20 percent.
Overall, we believe that the 1986 LAM updated reserve
report, made coincident to the acquisition, is the best estimate
of the value of the Tri-Power reserves at the time of the
acquisition. Not only was LAM familiar with the properties, but
LAM had available information that has since been lost.
Accordingly, we find the estimated reserves, as set forth in the
1986 LAM updated reserve report, to be the most reliable estimate
of the reserves. Moreover, the oil and gas price forecast
provided by petitioner to LAM for use in the rollforward fell
within the range reported in the 1986 SPEE survey. As discussed
supra in our findings of fact, petitioner's price forecast was
within one standard deviation of the 1986 SPEE mean.
Accordingly, we reject the notion that the price forecast used in
the 1986 LAM updated reserve report was overly optimistic.
Finally, the 1986 LAM updated reserve report included a schedule
showing a range of present worth estimates using different
discount rates. LAM estimated the present net worth of Tri-
Power's proved and producing reserves to be $14,447,362, using a
20-percent discount rate. Even if we accept respondent's
assertion that 20 percent is the proper discount factor, the
record supports a finding that petitioner paid $9.75 million for
stock in a corporation with assets having a value of at least
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