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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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