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In valuing the K-Mart photo processing equipment, however,
Svoboda was unable to find published market data. Accordingly,
he relied on (1) discussions with equipment brokers and used
equipment dealers and (2) information on that equipment from the
market at the time he prepared his report. His research
uncovered very little information regarding the equipment during
the mid-1990s. Although the manufacturers’ representatives for
the K-Mart equipment indicated that the K-Mart equipment might
have either a 5- to 7-year life or an 8- to 10-year life, Svoboda
determined that the K-Mart equipment had a 10-year useful life.
He set a 5- or 10-percent “floor” or selling price for the K-Mart
equipment at the end of its useful life and developed a
depreciation curve to reach the K-Mart equipment’s fair market
values and future residual values.
(b) Svoboda’s Fair Market Value for
the Over Lease Residual Interests
Svoboda opined that the residual interests in the K-Mart and
Shared equipment had a fair market value ranging from $122,000 to
$263,000. He considered the three traditional approaches (i.e.,
sales, income, and cost) for valuing equipment and chose the
income approach, explaining that “the cost approach was not
applicable and comparable sales were not available.”
Svoboda chose the income approach because “Ultimately the
value of the over lease residual * * * [interests] equates to the
present worth of future benefits”. His “goal was to quantify the
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