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a weighted average that produced a value of $9,050 per acre.
Multiplying by the number of acres in the parcel at issue led to
an appraised value of $284,300.
Moritz also used the DCF approach. He first developed a
hypothetical mining plan. His plan used 50-foot setbacks to
create an adequate buffer between the pit and adjacent property,
and assumed a work area of approximately seven acres, to be set
on a portion of the property that could not, in his view, be
economically mined. Moritz also believed that the pit walls
would have to remain at a 32-degree slope in order to be stable.
His mining plan calculated that with the setbacks, pit-wall
slope, and operating area, the property contained 1.9 million
minable tons of aggregate. He then took another 10% off to
account for normal waste. He estimated that the mine would
produce 150,000 to 200,000 tons annually, and generate royalties
of $0.50/ton. Using a 28% discount rate to compute present
value, these estimates, assumptions, and conclusions taken
together led him to a value of $326,000 for the mining interest.
He computed the residual value of the property to be $1,000 per
acre and discounted that to a total present residual value of
$9,900, which gave a final DCF value of $335,900. Moritz finally
weighted the two values--two-thirds of the comparable sales value
and one-third of the DCF value--and came up with a final estimate
of $301,000.
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Last modified: November 10, 2007