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interests, and stock options of privately and publicly held
companies.
Mr. Scribner determined that the estimated useful lives of
the favorable financing intangible assets equal the average
weighted lives of the debt obligations that give rise to them.
According to Mr. Scribner, the estimated useful lives of the
favorable financing intangible assets did not change on account
of subsequent unforeseen events because
the interactions of market participants force the
incorporation of all known and expected information
available at that date into the existing prevailing
market interest rate. Therefore, the market consensus
establishes the current market interest rate to be the
best estimate of the prevailing interest rate over the
life of the investment.
Mr. Scribner states that the average weighted life
represents the time it takes for the average dollar of principal
borrowed to be repaid to the lender. The average weighted life
is calculated by: (1) Multiplying the principal payment by the
number of years or pro rata portion of a year that the principal
amount has been outstanding, (2) adding the results for all
payment periods, and (3) dividing that sum by the total principal
paid.20 For debt obligations that do not repay any principal
20 The average weighted life formula is as follows:
AWL = E PMT x n
P
PMT is the principal payment, n is the number of years that the
principal amount has been outstanding, and P is the total
(continued...)
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