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based on rates of return available (as of the valuation date) from
alternative investments of similar type and quality. Application
of this method requires forecasting future benefits from the
ownership of the operations as well as future investments required
to maintain the level of benefits.
Mr. Gampel determined Powhatan Associates’ anticipated income
stream by (1) projecting the number of time-share intervals sold as
of the respective valuation dates, and (2) estimating the sale
price for those intervals. He projected the number of intervals
sold by averaging the interval sales for the 2-year period
preceding each valuation date. (The interval sales were 1,408 for
1987, 1,754 for 1988, and 1,749 for 1989.) Next, he divided total
sales by intervals sold for each of 1987, 1988, and 1989 in order
to arrive at the average interval price for each year. By using
this methodology, Mr. Gampel determined the average interval price
to be $11,400 for 1987, $13,100 for 1988, and $13,300 for 1989, and
the average interval price for the 1987-88 period to be $12,250,
and for the 1988-89 period to be $13,200.
Mr. Gampel then considered cost of sales for the intervals,
taking into account construction costs, project amenities, sales
commissions, and the development fee payable by Powhatan Associates
to WVI. He estimated cost of sales to be 71 percent for the 1989
valuation date and 69 percent for the 1990 valuation date. In
making this determination, Mr. Gampel considered interest income,
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