-193-
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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