The bankruptcy court erred in valuing real property collateral (improved space in an airport terminal) at the unimproved value of $17/sq. ft. where evidence indicated that the fair market value of improved space in another terminal in the same airport was $63/sq. ft. Even if a discount was appropriate to the $63/sq. ft. rate to take account of differences between the two spaces, any rate higher than $30 sq. ft would have resulted in 100% payment to the secured creditors.

The bankruptcy court also erred in selecting a discount rate for its DCF valuation. The court averaged the rates suggested by two opposing experts. While "an arbitrator might choose such a method, and perhaps a jury would do so behind closed doors, a judge should choose the right discount rate rather than split the difference between the parties." While it might be appropriate to select a higher discount rate due to the volatile nature of the airline business, the evidence indicated that this particular airport was operating at capacity and was able to raise money at 8% on an unsecured basis, warranting a discount rate no higher than 8%.