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Kidder/Kirby valued the Parker Property using the discounted
cash-flow approach. In determining the reversionary value
element of the discounted cash-flow approach, Kidder/Kirby used
the comparable sales approach.
Table 7 shows Atkinson’s, Hulberg’s, and Kidder/Kirby’s
valuation of the Parker Property under their respective
approaches.
Table 7
Approach Atkinson Hulberg Kidder/Kirby
Comparable sales $665,300 $1,468,000 --
Income 462,000 1,448,000 --
Cost 803,500 –- --
Discounted cash-flow –- –- $940,000 to
995,500
Conclusion 600,000 1,460,000 940,000 to
995,000
Atkinson made many of the same errors in valuing the Parker
Property as he did with the Lafayette Property. Hulberg relied
on one such error.
In his income approach, Hulberg treated the tenant on the
Parker Property as “holding over on a month-to-month tenancy.”
He based this on Atkinson’s report, which does indeed make this
20(...continued)
date. In addition, potential purchasers of older
properties rarely, if ever, estimate the value of
potential purchases utilizing the depreciated cost
method; purchasers for similar properties typically
consider only the market and income approaches. When
the cost approach is used, it is typically used to
ascertain the feasibility of new construction.
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