Estate of Fred O. Godley, Deceased, Fred D. Godley, Administrator CTA - Page 31




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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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Last modified: May 25, 2011