- 27 -
be increased by about 9 percent per annum, and so they used a 9-
percent factor.
Accepting a $150,000 cash per-acre value, the 90.74 acres
would produce a $13,611,000 gross value. We accept the 9-percent
discount rate and apply it to the agreement’s contemplated two
closings, to wit: no later than 3 and 6 years from June 1994.
These closing dates represented outside limits, and the closings
could possibly have occurred earlier. It was estimated that, as
of June 1994, the entitlement process would, on a fast track,
take about 1-1/2 years and, at the outside, 3 to 4 years. We use
the 3- and 6-year dates (the limits of the June 1994 agreement)
to account for the lapse of time until payment and account for
the 1 year and several months by which the date of death preceded
the June 1994 agreement. Because of the known difficulties
expected to be encountered in the approval process, it is also
reasonable to use the 3- and 6-year closing dates and discount
one-half of the contract price to account for a 3-year delay and
the other to account for a 6-year delay. Using a 9-percent
discount rate, we hold that the present value of the $13,611,000
contract price would be $9,312,992 (present value of one-half of
$13,611,000 at 9 percent for a 3-year period ($5,255,095) and
one-half of $13,611,000 at 9 percent for a 6-year period
($4,057,897)).
As a final matter, we consider the appropriate fractional
discount, if any, that should be applied to decedent’s one-half
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