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Burns derived his 5.2-percent Company/industry reduction directly
from a data base published by Ibbotson Associates, which suggests
a 5.2-percent reduction for companies in the “Ship and boat
building and repairing” category. This obviously translates into
a premium for that industry’s category.
Mr. Dorman, on the other hand, listed six general categories
and the fact that Godfrey was a small company to increase the
risk factors and arrive at his 3-percent adjustment in the
Company/industry category. That, of course, translates into a
discount for the industry category. Here again, Mr. Dorman’s
explanation for his adjustment is without specifics.
The estate argues that the 5.2-percent Company/industry
reduction that Mr. Burns obtained from the Ibbotson Associates
data base was inappropriate because the data, to some extent,
were derived from years after 1997. Mr. Burns explained that
such information was not available before 2001 and the data base
included the years 1996 through 2001. In defending his use of
that data base, Mr. Burns explained that industry risk tends to
trend and does not generally have spikes. In addition, Mr. Burns
compared some “betas” of comparable publicly traded companies and
found that they had a composite 5-percent industry
risk premium, which supports the 5.2-percent premium Mr. Burns
used.
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