Garwood Irrigation Company - Page 29

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          that a sale within the basin would likely take about 6 months to            
          complete, while a contested interbasin transfer could take 5                
          years.  We believe that an estimate of 3 years is reasonable in             
          predicting the closing date for the Corpus Christi transaction,             
          especially given the intent of the 1997 legislature to deal with            
          water rights.                                                               
               The experts agreed that the expected payments petitioner               
          would receive from the Corpus Christi transaction (both the                 
          monthly payments and the balance at closing) should be                      
          discounted.  The monthly payments were contractually guaranteed             
          to generate income for petitioner until the sale closed or the              
          option agreement ended.  We conclude above that it was                      
          foreseeable that the sale would be completed 3 years after the              
          valuation date, which would require Corpus Christi to pay $25,000           
          per month for 36 months.  The value of the monthly payments is              
          $25,000 multiplied by 36 months, or $900,000.  When this income             
          stream is discounted using our 8-percent cost of capital                    
          discount, the value of the monthly payments is $773,129.                    
               The payment of the balance at closing should be discounted             
          by a higher rate than the cost of capital.  We disagree with Mr.            
          Lloyd’s assertion that a buyer of water rights would require the            
          same rate of return as a private equity or venture capital                  
          investor.  The risk that regulatory hurdles would impede a sale             
          of petitioner’s water right is mitigated by the fact that                   






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Last modified: May 25, 2011