Estate of James J. Renier, Deceased, Kent L. Renier and Dubuque Bank & Trust Company, Co-Executors - Page 33




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          be projected into the future as sustainable growth.  Mr. Kramer             
          addressed this issue by adding 5 percent to Renier’s expected               
          future annual income prior to capitalization.  We agree that this           
          method correctly accounts for the recent strength in Dubuque’s              
          retail economy, while excluding growth attributable to the area’s           
          1993 flood.  We therefore conclude that the most accurate long-             
          term growth assumption for Renier is 4.15 percent.  However, we             
          also believe it is appropriate to adopt Mr. Kramer’s methodology            
          of adding 5 percent to Renier’s expected future annual income to            
          account for the recent strength in Dubuque’s retail economy.  In            
          further support of this conclusion, we note that Renier faced               
          stiff competition from a number of much larger chain retailers,             
          including K-Mart, Radio Shack, Sears, and Wal-Mart, putting in              
          doubt Renier’s ability to sustain a high sales growth rate after            
          the valuation date.                                                         
                           d. Conclusion: Income Valuation of Renier’s                
                           Operating Assets                                           
               Based on the foregoing, we conclude that the appropriate               
          capitalization rate on the valuation date equaled 20.75 percent;            
          namely, Mr. Kramer’s discount rate of 24.9 percent, less an                 
          estimated long-term growth rate of 4.15 percent.  Furthermore, as           
          previously discussed, this capitalization rate should be applied            
          to 105 percent of Renier’s expected future annual income, or                
          $125,749.  Dividing this amount by the capitalization rate, we              







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