-191-
the years in his projection period to arrive at net after-tax
cashflows.142
iv. Valuations
Mr. Medress determined the present value of future cashflows
using a discount rate of 11.8 percent calculated on an industry
basis with the buildup method, adjusting for inflation, company
size, and the fact that a film library of completed film titles
does not have the same business risk as the full range of
business activities of companies engaged in film production and
distribution.
Under scenario 1, Mr. Medress concluded that the fair market
value of the 65 EBD film titles, as of December 11, 1996, was
$1.6 million (rounded). Under scenario 2, Mr. Medress determined
that the fair market value of the EBD film titles, as of December
11, 1996, was $1.5 million (rounded).
v. Market Approach
Mr. Medress did not use a market approach in valuing the EBD
film library. Nonetheless, as a reality check on his
conclusions, he compared the average value per title from his
analysis ($24,219) with the average price per title from the sale
of the LIVE Entertainment film library ($68,000), which occurred
approximately 4 months after December 11, 1996. Mr. Medress
142 Mr. Medress amortized the projected purchase price for
the EBD film titles on a pro rata basis according to the
projected gross receipts from the film titles.
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