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Another area of disagreement among the experts is the
appropriate duration of the cash-flow period. Mr. Holden uses a
7-year cash-flow period whereas Mr. Marx uses a 10-year cash-flow
period. Mr. Holden justifies his 7-year period on the basis of,
inter alia, market uncertainties and the fact that as the cash-
flow period is extended into the future, the analysis becomes
less reliable. Mr. Holden also notes that real estate markets
tend to flow in 7-year cycles. Mr. Marx points out that a 10-
year cash-flow period is supported by information from local
brokers and national real estate publications. Although 7 years
may be a reasonable cash-flow period in some cases, we are
inclined to follow the trends of the Montecito-Santa Barbara real
estate market. We find, therefore, that Mr. Marx's estimate of a
10-year cash-flow period is persuasive because it follows more
closely Santa Barbara's real estate norms.
On the basis of the foregoing discussion, we find Mr.
Holden's valuation estimates to be too low and find Mr. Marx's
estimates to be too high. We believe that $9,600,000 is a
reasonable estimate of the value of MVN and $5,680,000 is a
reasonable estimate of the value of MVS. With such values in
mind, we now proceed to value Mr. Borgatello's interest in VIC.
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