- 78 -
future benefits and convert them to present value using a
discount rate commensurate with the risk associated with
obtaining those benefits”. He considered three variables
including: (1) Quantifying the future benefits; (2) determining
the appropriate discount rate; and (3) determining the time
required to achieve those benefits and quantifying the risks
associated with achieving those benefits.
In order to quantify the future benefits of the residual
interests, Svoboda used the same monthly rental income generated
during the preceding leases. Recognizing that those monthly
rates were too high, he used an “anticipated realization factor”
to project the future rental income. This adjustment, according
to Svoboda, would take into account (1) the likelihood that the
equipment would be leased during petitioner’s over lease residual
interest periods, and (2) the anticipated decline in monthly
rents for the equipment over time. Relying heavily upon his
conversations with Paul Raynault (Raynault), CLI’s chairman and
50-percent shareholder, concerning the likelihood that K-Mart and
Shared would continue to rent after the existing leases expired,
Svoboda determined that his anticipated realization factors
should be 25 to 50 percent for the K-Mart photo processing
equipment and 1 to 5 percent for the Shared computer equipment.
With respect to the Shared computer equipment, Svoboda recognized
that technology was changing rapidly and that there would be
Page: Previous 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 NextLast modified: May 25, 2011