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Monroe
Dvorak’s Report
Year 1 Year 2 Year 3 Year 4 Year 5
Net operating
income1 $176,350 $176,350 $176,350 $176,350 $176,350
Cash-flow 176,350 176,350 176,350 21,617,165
Present value3 154,693 135,696 119,031 957,491
Sum of present values: $1,366,910
Estimated value: $1,370,000
1 In contrast to his computations for Charlotte, Dvorak
did not inflate the net operating income figures for Monroe
by 1.5 percent from year to year, nor did he adjust the
starting net operating income figure for inflation to state
it in 1989 dollars. Dvorak gives no reason for failing to
make these adjustments, and for consistency we make them in
the table that follows.
2 This figure equals the reversionary value of
$1,440,815 plus the net operating income from year 4 of
$176,350. The reversionary value equals the net operating
income from year 5, $176,350, divided by Dvorak’s terminal
capitalization rate of 11.75 percent, minus costs of sale of
$60,034.
3 Dvorak discounted to present value using a 14-percent
discount rate.
Court’s Adjustments
Year 1 Year 2 Year 3 Year 4 Year 5
Net operating
income1 $195,386 $198,317 $201,292 $204,311 $207,376
Cash-flow 195,386 198,317 201,292 21,987,619
Present value3 172,909 155,311 139,505 1,219,044
Sum of present values: $1,686,769
Estimated value: $1,690,000
1 These figures include an adjustment to the vacancy
rate that we have concluded is appropriate, from 3 percent
down to 1 percent. This caused an increase of $5,019 (2
percent of the rental income figure of $250,080) 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 and inflated at the same rate year by year.
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