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estimate of the value of a 100-percent fee simple interest in the
leased land in 1991. Maloy determines this baseline estimate on
the basis of comparisons with numerous property sales in the same
counties as the leased land. Maloy then applies a growth rate of
5 percent to project a future value for the reversion in 2023 of
$10,245,020.23 From this amount, Maloy subtracts $2,454,315 for
estimated replanting costs in 2023, to yield net future value in
2023 of $7,790,706.24 Maloy then applies a discount rate of 8
percent to yield a present value of the reversion of $663,768.
As previously discussed, we disagree with Maloy’s selected
discount rate as being understated. We conclude, however, that
Maloy’s valuation of the reversion is in all other respects
reasonable and is based on sound assumptions and methodology,
taking into consideration, among other things, reasonable costs
of reforesting the land at the end of the lease.25 Accordingly,
23 Maloy’s assumption of a 5-percent growth rate is based on
his determination that timberland in general would benefit from
increased timber prices, Federal programs, and the leasing of
hunting rights.
24 Maloy estimates replanting costs in 2023 by determining
an estimated $150 per acre replanting cost in 1990 and then
adjusting this number upward to reflect an estimated annual
inflation rate of 1.87 percent.
25 Petitioner’s own witness, Charles Irwin, testified that
in 1991 it probably would have cost $75-$80 per acre to prepare
the land for planting if it lay fallow for under 1 year, and $50-
$55 per acre to plant the land, resulting in a total cost of
$125-$135 per acre. Thus, Maloy’s replanting estimate is
actually greater than Irwin’s. Irwin does claim that the costs
to prepare the land could “probably double” if the fallow period
was 4 or 5 years. It seems unlikely, however, that the lessee
(continued...)
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