Estate of H.A. True, Jr. - Page 155




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          entirely.  Accordingly, we find that Dave True owned a                      
          controlling interest in Belle Fourche at his death.                         
              Turning to respondent’s proposed values, we find that the               
          net asset value method yielded reliable controlling values for              
          Belle Fourche’s total capital as of June 4 and June 30, 1994.               
          Mr. Gustavson used the discounted cash-flow method to value Belle           
          Fourche’s pipeline assets, and verified his results with both the           
          comparable sales and cost approaches.  Under the DCF method, he             
          computed net cash-flows based on 23 years of Belle Fourche’s                
          operating data and on published information from regulatory                 
          authorities and industry surveys.  Even though Belle Fourche’s              
          actual throughput had increased in the early 1990's, to be                  
          conservative in his estimates, Mr. Gustavson assumed the higher             
          throughput decline rates projected by the State of Wyoming.                 
          Although cash-flow projections are inherently speculative, we               
          find Mr. Gustavson’s estimates to be sufficiently supported by              
          Belle Fourche’s past performance and by industry data.                      
              Mr. Kimball criticized Mr. Gustavson’s use of a 14-percent              
          cost of capital to discount projected net cash-flows, claiming              
          that the rate was unsubstantiated and that it was wrongly based             
          on the pipeline industry’s regulated profit margin (10-percent              
          maximum tariff over cost of service).  We disagree with                     
          petitioners and accept Mr. Gustavson’s proposed discount rate for           
          the following reasons.                                                      







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