Santa Monica Pictures, LLC, Perry Lerner, Tax Matters Partner - Page 113

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               Mr. Wagner and Mr. Medress are reasonably close in their               
          estimated return rates (7.5 percent vs. 5 percent, respectively)            
          for distributed units in the rental market.  Mr. Wagner does not            
          question Mr. Medress’ estimated 20-percent return rate for                  
          distributed units in the sell-through market.  The experts do not           
          question each other’s weighted average cost of capital, discount            
          rate, or tax rate figures.  The experts are also in basic                   
          agreement as to manufacturing, packaging, and shipping costs                
          ($2.50 per unit to $2.75 per unit); however, they disagree on               
          marketing costs and whether, and to what extent, overhead expense           
          should be considered.  In making his income projections, Mr.                
          Medress considered the sexual and shock exploitation nature of              
          some of the EBD film titles; Mr. Wagner did not.  The experts               
          express general disagreement regarding their respective                     
          methodologies and what assumptions should be considered in                  
          projecting an income stream for the EBD film titles.                        
               ii.  Exclusion of Certain Film Titles                                  
               Both experts present alternative valuations that exclude               
          certain film titles from the EBD film library.  With respect to             
          some film titles, their exclusions overlap.                                 
               Relying on the records that Troy & Gould obtained, Mr.                 
          Wagner determined that the following 13 film titles in the EBD              
          film library did not have confirmed physical materials:  “Alley             
          Cat”, “Bombay Talkie”, “Cardiac Arrest”, “Courtesans of Bombay”,            






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