Estate of Lewis A. Bailey, Deceased, Frances Jeanette Foster, Executrix - Page 16

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               Valuation of The California Motel                                      
                    The Ohrmund Report                                                
               In valuing the California motel, all the experts start with            
          the Ohrmund report.  Accordingly, we start there too.  The                  
          Ohrmund report concluded that the December 18, 1995, value of the           
          California motel was $1,388,000.  The Ohrmund report states that            
          the appraisal of the property “has been made with the                       
          understanding that the present ownership of the subject property            
          includes all rights that may be lawfully owned, and therefore,              
          title in ‘fee simple’.”  Consequently, in valuing the California            
          motel, the Ohrmund report did not consider any effect of                    
          decedent’s one-half ownership interest in parcel 2.                         
               The Ohrmund report employed three methods of estimating the            
          market value of the California motel:  the cost approach, the               
          sales comparison approach, and the income approach, which yielded           
          value indications of $1,100,000, $1,374,000, and $1,400,000,                
          respectively.4  The Ohrmund report correlated these three values            
          to reach its final estimate of $1,388,000.                                  
                    Respondent’s Expert                                               
               Smith adopted the Ohrmund report’s $1,388,000 value for the            
          California motel.                                                           

               4 To reach the $1,374,000 value indicated by the income                
          approach, the Ohrmund report applied a capitalization rate of               
          13.5 percent to estimated annual net income of $192,536.                    

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