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increased pressure on the lessees to replace computer equipment.
Additionally, by the mid-1990s computer equipment manufacturers
were inclined to offer significant financial incentives to
potential customers. Svoboda applied a 10-percent discount
factor to account for those factors. Svoboda’s fair market value
opinion concerning the over lease residual interests is
summarized as follows:
Present Value of
Anticipated Realization Projected Future
Factor Percentage Range Rental Income1
Equipment Low High Low High
K-Mart 25 percent 50 percent $116,292 $232,585
Shared 1 percent 5 percent 6,036 30,182
Total and FMV2 122,000 263,000
1Determined by applying a discount factor of 10
percent.
2Rounded to nearest $1,000.
ii. Respondent’s Expert
Daley concluded that, as of September 28, 1995, the K-Mart
photo processing and Shared computer equipment would: (1) Have
an inconsequential estimated residual value at the beginning of
the residual lease periods, and (2) generate no future rental
income during those residual lease periods. He also concluded
that the K-Mart and Shared equipment would have a total combined
estimated value of $499,406 at the end of the original leases.
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