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difference equals the difference between Mr. Sliwoski’s required
rate of return on equity of 24.76 percent and Mr. Kramer’s rate
of 24.90 percent. In the instant case, the correct risk-free
rate is that of 20-year U.S. Treasury bonds used by Mr. Kramer.
We so conclude because both experts developed their estimates of
the required rate of return on equity using data from Ibbotson
Associates, which publishes equity risk premium data related to
20-year coupon bond maturities, but no such risk premium data for
30-year maturities.19 For this reason, we find more appropriate
Mr. Kramer’s required rate of return on equity of 24.90 percent.
c. Estimate of Earnings Growth Rate
Both experts agreed that the required rate of return on
equity used to convert expected future earnings into a value
figure should be adjusted to account for the estimated rate of
growth in Renier’s earnings after the valuation date. The
experts disagreed, however, in their estimates of Renier’s long-
term growth rate. Mr. Sliwoski reduced his required rate of
return on equity by 6 percent to account for expected growth in
Renier’s future income stream, while Mr. Kramer reduced his
required rate of return by only 3 percent.
We do not believe either expert used a reasonable estimate
of the rate of growth. Mr. Sliwoski derived his 6-percent growth
19 See Ibbotson Associates, Stocks, Bonds, Bills &
Inflation: 1994 Yearbook, 146; see also Pratt et al., Valuing a
Business, The Analysis and Appraisal of Closely Held Companies
163, n.10 (3d ed. 1996).
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