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of list price. In Daley’s judgment, the value of the equipment
reaches “salvage value” when the equipment is “scrapped or sold
off to third party maintenance companies” for spare parts.
Daley concluded that by May 1, 2000, with one exception, the
K-Mart and Shared equipment would have no estimated residual
value. The one exception was a piece of photo processing
equipment that Daley estimated would have a nominal residual
value of $194.
Daley used DMC’s compiled computer equipment reports to
determine the residual values for the Shared computer equipment.
With respect to the K-Mart photo processing equipment, Daley
compiled information from a similar data base on photo processing
equipment. Using a similar methodology as he used for computer
equipment, Daley arrived at the conclusion that the K-Mart
equipment would have no residual value.
On the basis of that analysis and using a 10-percent
interest or discount rate, Daley projected the future rental
income the K-Mart and Shared equipment would produce during the
master lease and over lease periods. He projected that the K-
Mart and Shared equipment would produce no rental income during
the purported over lease.
Daley opined that the underlying K-Mart and Shared end-user
lease equipment had the following fair market values as of the
dates specified below:
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