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date. Dr. Kursh reasoned that the aggregate distributions
made during 1992 were at the minimum level of distributions
that a potential buyer would anticipate. Applying the
discount rate of 9.7 percent to the decedent's 1992
distributions of $202,000, Dr. Kursh computed the value of
the decedent’s interest in Hill House of $2,082,474 (i.e.,
$202,000 � 9.7 percent).
Dr. Kursh then applied a marketability discount. In
order to determine the amount of this discount, he used the
Quantitative Marketability Discount Model (QMDM) that is
described in a book written by Mr. Z. Christopher Mercer
entitled Quantifying Marketability Discounts (1997). The
QMDM is an economic model that attempts to relate the
present value of the future returns of an investment in the
form of distributions and capital appreciation to the
amount an investor is willing to pay for the investment.
The QMDM incorporates various factors, including: The
expected distribution yield (i.e., the expected annual
return through distributions), the expected growth rate of
value (i.e., the expected growth in the underlying asset
value), the required holding period return (i.e., the rate
of return on similar investments), and the assumed holding
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