Estate of Marcia P. Hoffman, deceased, Elisabeth Hoffman, Personal Representative - Page 22




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          of the Clubside promissory notes payable to decedent and Hoffman            
          Associates.  Mr. Mitchell determined the value of the notes based           
          on the timing of payments and the rate of return that a holder of           
          the notes would require.  To determine a proper return rate, he             
          reviewed:  (1) Interest rates of various debt securities; (2)               
          corporate bonds of various ratings; (3) interest rates for                  
          conventional mortgages, 30-year and 1-year Treasury securities,             
          and bank prime loans; and (4) venture capital returns.  Mr.                 
          Mitchell felt that the promissory notes did not possess                     
          characteristics of bonds that were in default and highly                    
          speculative in nature because the net proceeds from a sale of               
          Clubside’s assets (the Cathead property) would be sufficient to             
          satisfy all debt obligations as of the valuation date.  Mr.                 
          Mitchell felt that rates ranging from 10-to-15 percent would                
          adequately account for the risk of the promissory notes and                 
          concluded that 12.5 percent was the appropriate rate.15  Mr.                
          Mitchell stated that he believed that this rate of return                   
          incorporated the lack of marketability of the promissory notes.             
          Mr. Mitchell assumed that the notes would not be paid until the             
          date of maturity; therefore, he applied the 12.5-percent rate of            
          return to the values he assigned the promissory notes as of the             

               15Mr. Mitchell noted that this rate of return was more than            
          5 percent above the bank prime loan rate and approximately 2                
          percent above a B-rated bond, which he explained has                        
          vulnerability to default but currently has the capacity to meet             
          interest and principal payments.                                            





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