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and technology-related expenditures. The 30.5-percent
capitalization rate used by the estate’s experts should be
reduced by 12 percent, from 30.5 percent to 18.5 percent, to
better reflect our belief that the Internet, as of May 2, 1998,
constituted a factor for TPC almost as positive as it was
negative. Also, $68 million of nonoperating assets should be
added.
Our calculation of the appropriate 18.5-percent
capitalization rate is as follows:
Risk Factors Percentage
Risk-Free Rate of Return 6.0
Corporate Equity Risk 7.8
Small Stock Risk 4.7*
Internet & Management Risk 0.0
Capitalization Rate 18.5
* We note that, in spite of the size of TPC,
respondent did not discretely challenge
this small stock discount.
In discounting to reflect the estate’s minority 20-percent
interest in TPC, we allow a 15-percent minority interest discount
and a 30-percent lack of marketability discount. We scale back
the minority and lack of marketability discounts from those used
by the estate’s experts because, as noted above, we find the
estate’s experts’ numbers to be arbitrary and without support.
We believe a minority interest discount of 15 percent is a
better reflection of the estate’s 20-percent common stock
interest in TPC. Although a minority interest, the holder of
such interest would own the single largest block of stock in TPC,
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