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Sum of present values: $1,478,407
Estimated value: $1,480,000
1 This figure equals the reversionary value of
$1,616,196 plus the net operating income from year 4 of
$199,039. The reversionary value equals the net operating
income from year 5, $202,024, divided by Dvorak’s terminal
capitalization rate of 12 percent, minus costs of sale of
$67,341.
2 Dvorak discounted to present value using a 15-percent
discount rate.
Court’s Adjustments
Year 1 Year 2 Year 3 Year 4 Year 5
Net operating
income1 $195,948 $198,887 $201,871 $204,899 $207,972
Cash-flow 195,948 198,887 201,871 22,028,313
Present value3 173,405 155,758 139,907 1,243,941
Sum of present values: $1,713,011
Estimated value: $1,710,000
1 These figures include the adjustment to the vacancy
rate that we have concluded is appropriate, from 3 percent
down to 1 percent. This caused an increase of $5,202 (2
percent of the rental income figure of $259,200) each year
in 1985 dollars. The figures in the table are inflated to
1989 dollars using Dvorak’s inflation rate of 1.5 percent
per year.
2 This figure equals the reversionary value of
$1,823,313 plus the net operating income from year 4 of
$204,899. The reversionary value equals the net operating
income from year 5, $207,972, divided by our adjusted
terminal capitalization rate of 11 percent, minus costs of
sale of $67,341.
3 We discount to present value using our adjusted 13-
percent discount rate.
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