COMMONLY USED METHODS OF VALUATION
Fundamentals, Techniques & TheoryCOMMONLY USED METHODS OF VALUATIONCHAPTER SIXCOMMONLY USED METHODSOF VALUATION“October. This is one of the particularly dangerous months to speculatein stocks. The others are July, January, September, April, November,May, March, June, December, August and February.”Mark TwainI. OVERVIEWMark Twain’s reasoning could sometimes be appropriately applied to business valuations. Businessowners frequently have the need or desire to establish a value for their business. As was discussed inChapter One, there are many reasons for valuing a business. Professionals involved in valuingclosely held businesses know it is not a simple task. The complexity is further compounded by thefact that each business owner's purpose, motive, and goal in valuing the business varies greatly fromthose of others. No two businesses are alike; therefore, no one size fits all. The effect these issuesmay and usually do have on the valuation process gives rise to the concept that the valuation processis more of an art than a science.There are several commonly used methods of valuation. Each method may at times appear moretheoretically justified in its use than others. The soundness of a particular method is entirely basedon the relative circumstances involved in each individual case. The valuation analyst responsible forselecting the most appropriate method must base his or her choice of methods on knowledge of thedetails of each case. When this knowledge is appropriately applied, much of the art factor iseliminated from the process and valuation becomes more of a science. The objective of the BusinessValuation Certification Training Center is to make the entire process more objective in nature.The commonly used methods of valuation can be grouped into one of three general approaches, asfollows:1.Asset Based Approacha.b.Book Value MethodAdjusted Net Asset Methodi.ii.iii.2.Income Approacha.b.3.Replacement Cost PremiseLiquidation PremiseGoing Concern PremiseCapitalization of Earnings/Cash Flows MethodDiscounted Earnings/Cash Flows MethodMarket Approacha.b.Guideline Public Company MethodComparable Private Transaction Method 1995–2012 by National Association of Certified Valuators and Analysts (NACVA). All rights reserved.Used by Institute of Business Appraisers with permission of NACVA for limited purpose of collaborative training.Chapter Six – 12012.v1
COMMONLY USED METHODS OF VALUATIONc.d.4.Fundamentals, Techniques & TheoryDividend Paying Capacity MethodPrior Sales of interest in subject companyOther Approachesa.Income/Asseti.ii.b.1Excess Earnings/Treasury Method1Excess Earnings/Reasonable Rate MethodSanity Checksi.ii.Justification of PurchaseRules of ThumbThese lists, while not 100 percent inclusive, represent the commonly used methods within eachapproach a valuation analyst will use.II. ASSET BASED APPROACHThe asset based approach is defined in the International Glossary of Business Valuation Terms as “ageneral way of determining a value indication of a business, business ownership interest, or securityusing one or more methods based on the value of the assets net of liabilities.” Any asset-basedapproach involves an analysis of the economic worth of a company’s tangible and intangible,recorded and unrecorded assets in excess of its outstanding liabilities. Thus, this approach addressesthe book value of the Company as stipulated in Revenue Ruling 59-60:“The value of the stock of a closely held investment or real estate holding company,whether or not family owned, is closely related to the value of the assets underlying thestock. For companies of this type the appraiser should determine the fair market values ofthe assets of the company adjusted net worth should be accorded greater weight invaluing the stock of a closely held investment or real estate holding company, whether ornot family owned, than any of the other customary yardsticks of appraisal, such asearnings and dividend paying capacity.”While the quote above clearly applies to holding companies, asset based approaches can also bevalid in the context of a company which has very poor financial performance. An importantconsideration when using an asset approach is the premise of value, both for the company and forindividual assets.A. BOOK VALUE METHODThis method is based on the financial accounting concept that owners’ equity is determined bysubtracting the book value of a company’s liabilities from the book value of its assets. Whilethe concept is acceptable to most analysts, most agree that the method has serious flaws. Undergenerally accepted accounting principles (GAAP), most assets are recorded at historical costminus, when appropriate, accumulated depreciation or cumulative impairments. Thesemeasures were never intended by the accounting profession to reflect the current values ofassets. Similarly, most long-term liabilities (bonds payable, for example) are recorded at the1Excess Earnings methods may be classified as hybrid methods as they include consideration of both net assets and earnings capacity of theenterprise.2 – Chapter Six2012.v1 1995–2011 by National Association of Certified Valuators and Analysts (NACVA). All rights reserved.Used by Institute of Business Appraisers with permission of NACVA for limited purpose of collaborative training.
Fundamentals, Techniques & TheoryCOMMONLY USED METHODS OF VALUATIONpresent value of the liability using rates at the time the liability is established. Under GAAP,these rates are not adjusted to reflect market changes. Finally, GAAP does not permit therecognition of numerous and frequently valuable assets such as internally developedtrademarks, trade names, logos, patents and goodwill. Thus, balance sheets prepared underGAAP make no attempt to either include or correctly measure the value of many assets. Thus,by definition, owners’ equity will not normally yield a valid measure of the value of thecompany. Despite these significant limitations, this approach can frequently be found inbuy/sell agreements.B.ADJUSTED NET ASSETS METHODThis method is used to value a business based on the difference between the fair market value ofthe business assets and its liabilities. Depending on the particular purpose or circumstancesunderlying the valuation, this method sometimes uses the replacement or liquidation value ofthe company assets less the liabilities. Under this method the analyst adjusts the book value ofthe assets to fair market value (generally measured as replacement or liquidation value) and thenreduces the total adjusted value of assets by the fair market value of all recorded and unrecordedliabilities. Both tangible and identifiable intangible assets are valued in determining totaladjusted net assets. If the analyst will be relying on other professional valuators for values ofcertain tangible assets, the analyst should be aware of the standard of value used for theappraisal. This method can be used to derive a total value for the business or for componentparts of the business.The Adjusted Net Assets Method is a sound method for estimating the value of a non-operatingbusiness (e.g., holding or investment companies). It is also a good method for estimating thevalue of a business that continues to generate losses or which is to be liquidated in the nearfuture.The Adjusted Net Assets Method, at liquidation value, generally sets a “floor value” fordetermining total entity value. In a valuation of a controlling interest where the business is agoing concern, there would have to be a reason why the controlling owner would be willing totake less than the asset value for the business. This might occur where the assets are underperforming, resulting in a conclusion of value that is less than the adjusted net assets value butmore than the liquidation value. Before concluding the Adjusted Net Assets Method hasestablished the floor value, the valuator should consider the potential of overstating the value ofassets, existence of non-operating assets, and other omissions in his/her determination.The negative aspect to this method is that it does not address the operating earnings of thebusiness. Therefore, it would be inappropriate to use this method to value intangible assets,such as patents or copyrights, that are typically valued based on some type of operating earnings(e.g., royalties). However, replacement cost methodology may be utilized in determining valuesof certain intangibles such as patents.Illustration – the following reconciliation between book values and fair market valuesincorporates four major adjustments:1.2.3.To remove non-operating assets, for example: excess cash and cash surrender value of lifeinsurance.To convert LIFO inventory to FIFO inventory.To estimate NPV of the deferred income tax liability associated with the built-in gain on LIFOreserve and PP&E based on a seven-year liquidation horizon discounted to NPV using a 5%discount rate (risk free rate). 1995–2012 by National Association of Certified Valuators and Analysts (NACVA). All rights reserved.Used by Institute of Business Appraisers with permission of NACVA for limited purpose of collaborative training.Chapter Six – 32012.v1
COMMONLY USED METHODS OF VALUATION4.Fundamentals, Techniques & TheoryTo adjust property and equipment to estimated fair market value based on appraisal performed byABC Appraisals, Inc.Book ValueCurrent Assets:Cash and Cash EquivalentsAccounts ReceivableRaw MaterialsWork in Process and Finished GoodsDeferred Income TaxesPrepaid ExpensesTotal Current AssetsProperty, Plant and Equipment, at Cost:LandBuildings and ImprovementsMachinery and EquipmentVehiclesOffice EquipmentTotal Property and EquipmentLess Accumulated DepreciationNet Property and EquipmentOther Assets:Cash Value of Life InsuranceDepositsTotal Other AssetsTotal Assets Current Liabilities:Note Payable to ShareholdersAccounts PayableIncome Taxes PayableAccrued LiabilitiesTotal Current LiabilitiesLong-Term Debt, Less Current PortionDeferred Income TaxesTotal LiabilitiesNet AssetsAdjusted Net Tangible Operating Asset Value(Rounded)Non-Operating Assets:Excess CashCash Surrender Value Of Life Insurance(Rounded)Adjusted Net Tangible 5,184,0141 234(518,000)187,706(86,000)(416,294) 2,860)30305,217,875(252,860)33,861-3Fair 973,000Please Note: In this example, an adjustment for deferred taxes was made. Not making an adjustment for deferredtaxes would be theoretically justified in a situation where the analyst is valuing a business for purposes of an AssetPurchase/Sale. However, an adjustment for deferred taxes may be appropriate in a valuation of a C-Corporationwhen the equity securities of the corporation are to be valued and adjustment has been made to adjust the value of2assets from historical amounts to an economic/normalized balance sheet.2In Estate of Dunn v. Commissioner, T.C. 2000-12; Estate of Davis v. Commissioner, 110 T.C. 530, and the appeal of Dunn in Dunn v. CIR, 301F.3d 339 (5th Cir. 2002) which are explained in detail in Valuation Issues and Case Law Update A Reference Guide, Third Edition, written by4 – Chapter Six2012.v1 1995–2011 by National Association of Certified Valuators and Analysts (NACVA). All rights reserved.Used by Institute of Business Appraisers with permission of NACVA for limited purpose of collaborative training.
Fundamentals, Techniques & TheoryCOMMONLY USED METHODS OF VALUATIONThe IRS has taken the position that it is inappropriate to take a discount for the income taxliability arising from asset liquidation when it is unlikely the liquidation will occur. In theEstate of Davis3, the issue was deferred tax on built-in gains (these potential taxes, also referredto as taxes on “trapped-in gains” in some Tax Court cases, is hereafter referred to as a “BIGtax”) on marketable securities. In Davis, the Tax Court indicated some discount should beconsidered and allowed a 15 percent discount. The Court was convinced that even though noliquidation was planned or contemplated, a hypothetical willing seller and willing buyer wouldhave taken into account the potential BIG tax in determining the price to be paid for the holdingcompany stock. In the Estate of Jameson4, the Court measured the BIG tax discount ontimberland based on the NPV of the tax using an expected liquidation date. In the Estate ofDunn5, the Tax Court allowed a discount on the asset approach but not the income approach. InDunn, the estate held stock in a C-Corp that rented heavy equipment and the valuator weightedthe asset and capitalization of cash flow approaches. In the Estate of Welch6, the Sixth Circuitconfirms the BIG tax discount.In summary, the BIG tax discount should be considered in valuing closely held C-Corp stock.Adjustments have ranged from 100% of the tax at the date of valuation, to 100% of the tax on apresent value basis over the time frame in which the tax is expected to be incurred, dependingon the facts and circumstances in the case.A crucial point to consider in dealing with taxes is the nature of the investment being valued. Abuyer who is considering acquiring an interest in a company as an asset purchase should beaware that a step-up in basis will be received, resulting in additional depreciation and taxbenefits. In this case, the tax liability for any capital gains will be with the former owner. Assuch, the buyer should be willing to pay full market price for the assets (less any commissionsor brokers’ fees).III. INCOME APPROACHRevenue Ruling 59-60 clearly requires that an income approach be used when it lists “the earningcapacity of the company,” as a factor to be considered. The income approach is defined in theInternational Glossary of Business Valuation Terms as, “A general way of determining a valueindication of a business, business ownership interest, security, or intangible asset using one or moremethods that convert anticipated economic benefits into a present single amount.”A. CAPITALIZATION OF EARNINGS/CASH FLOWS METHODThe Capitalization of Earnings Method is an income-oriented approach. This method is used tovalue a business based on the future estimated benefits, normally using some measure ofearnings or cash flows to be generated by the company. These estimated future benefits arethen capitalized using an appropriate capitalization rate. This method assumes all of the assets,both tangible and intangible, are indistinguishable parts of the business and does not attempt toseparate their values. In other words, the critical component to the value of the business is itsability to generate future earnings/cash flows. This method expresses a relationship between thefollowing:Mel H. Abraham, CPA, CVA, ABV, ASA) provide the valuation analyst good perspective with current tax court reasoning on issues relating tobuilt-in tax liability. Other cases also apply. The valuation analyst should be aware of court rulings on such issues.3Estate of Artemus D. Davis vs. Commissioner – June 30, 1998, USTC Docket 9337-964Jameson vs. Commissioner – February 9, 1999, T.C. Memo 1999-435Estate of Dunn – January 12, 2000, T.C. Memo 2000-126Welch vs. Commissioner – T.C. Memo 1998-167 1995–2012 by National Association of Certified Valuators and Analysts (NACVA). All rights reserved.Used by Institute of Business Appraisers with permission of NACVA for limited purpose of collaborative training.Chapter Six – 52012.v1
COMMONLY USED METHODS OF VALUATIONFundamentals, Techniques & TheoryEstimated future benefits (earnings or cash flows)Yield (required rate of return) on either equity or total invested capital (capitalizationrate)Estimated value of the businessIt is important that any income or expense items generated from non-operating assets andliabilities be removed from estimated future benefits prior to applying this method. The fairmarket value of net non-operating assets and liabilities is then added to the value of the businessderived from the capitalization of earnings.This method is more theoretically sound in valuing a profitable business where the investor'sintent is to provide for a return on investment over and above a reasonable amount ofcompensation and future benefit streams or earnings are likely to be level or growing at a steadyrate.ExampleCompany ABC has five-year weighted average earnings on an after-tax basis of 591,000. Ithas been determined that an appropriate rate of return for this type of business is 21.32 percent(after-tax). (See Ibbotson Build-Up Method in Chapter Five.) Assuming zero future growthand non-operating assets of 771,000 the value of ABC Company based on the capitalization ofearnings method is as follows:(Numbers rounded)Net earnings to equity 591,000Capitalization rate21.32%Total (rounded)B.2,772,000Value of non-operating assets 771,000Marketable controlling interest value 3,543,000DISCOUNTED EARNINGS/CASH FLOWS METHODThe Discounted Earnings Method is sometimes referred to as the Discounted Cash FlowMethod, which suggests the only type of earnings to be valued, using this method, would besome definition of cash flow, such as operating cash flow, after-tax cash flow or discretionarycash flow. The Discounted Earnings Method is more general in its definition as to the type ofearnings that can be used.The Discounted Earnings Method allows several possible definitions of earnings. It does notlimit the definition of earnings only to cash flows. The Discounted Earnings Method is anincome-oriented approach. It is based on the theory that the total value of a business is thepresent value of its projected future earnings, plus the present value of the terminal value. Thismethod requires that a terminal-value assumption be made. The amounts of projected earnings6 – Chapter Six2012.v1 1995–2011 by National Association of Certified Valuators and Analysts (NACVA). All rights reserved.Used by Institute of Business Appraisers with permission of NACVA for limited purpose of collaborative training.
Fundamentals, Techniques & TheoryCOMMONLY USED METHODS OF VALUATIONand the terminal value are discounted to the present using an appropriate discount rate, ratherthan a capitalization rate.1.DescriptionThe Discounted Earnings Method of valuing a closely held business uses the followingsteps:a)b)c)d)2.Determine the estimated future earnings of the business (in this example we haveprojected earnings for five years and have assumed no growth beyond this period).A terminal or residual value is often determined at the end of the fifth year. Theterminal value that is often used is merely the fifth-year earnings projected intoperpetuity.The discount rate determined incorporates an appropriate safe rate of return, adjustedto reflect the perceived level of risk for the business being valued.The estimated future earnings and the terminal value are then discounted to thepresent using the discount rate determined in Step c) and summed. The resultingfigure is the total value of the business using this method.ExampleAssume the following pre-tax fully adjusted cash flows as they relate to Homer Co.:Projected annual cash flows to be received at the end of:Year 1Year 2Year 3Year 4Year 5 10,50040,70080,600110,100150,300Year 1 of the projected cash flows is the year following the valuation date.The pre-tax discount rate is 24 percent.The pre-tax capitalization rate is 24 percent.Calculation of present value factors:Year12345Formula forPresent Value 5Present valuefactors for 24%rate of return0.80650.65040.52450.42300.3411 1995–2012 by National Association of Certified Valuators and Analysts (NACVA). All rights reserved.Used by Institute of Business Appraisers with permission of NACVA for limited purpose of collaborative training.Chapter Six – 72012.v1
COMMONLY USED METHODS OF VALUATIONFundamentals, Techniques & TheoryCalculate the value of the businessa)Calculate the present value of the annual cash flows:EndofYear12345b)Net CashFlow 0.80650.65040.52450.42300.3411PresentValue 8,46826,47042,27446,57251,268 175,052Calculate the present value of the terminal value:EndofYear5TerminalValue 626,250PresentValueFactor0.3411PresentValue 213,614No long-term sustainable growth is assumed. (Had we assumed sustainable growth atthree percent, our discount rate would have to be reduced by three percent to arrive atan appropriate capitalization rate.) The company’s terminal value is 626,250 at theend of year 5 (150,300 24%). This value, also know at the “terminal value”, is equalto the present value of a perpetual annual cash flow of 150,300.c)Add both present values:PV of annual cash flowsPV of terminal valueTOTAL VALUE OF BUSINESS 175,052 213,614 388,666Practice PointerThe valuator must use caution when using Cash Flows to Invested Capital as a benefit streamin a Discounted Cash Flow Model, where the capital structure of the Company is changing overthe projected period. In order to understand this issue, it is important to address whether thesubject interest is a controlling interest or a minority interest.3.Controlling InterestA controlling interest has the ability to change the capital structure. When valuing acontrolling interest, the valuator will generally (subject to the valuator’s purpose andstandard of value) base the weighted average cost of capital (WACC) on the optimumcapital structure or the average industry capital structure. In most cases, the optimumcapital structure and the average industry capital structure is the same. If a difference did8 – Chapter Six2012.v1 1995–2011 by National Association of Certified Valuators and Analysts (NACVA). All rights reserved.Used by Institute of Business Appraisers with permission of NACVA for limited purpose of collaborative training.
Fundamentals, Techniques & TheoryCOMMONLY USED METHODS OF VALUATIONexist between the optimum capital structure and the average industry capital structure, thevaluator will generally utilize the optimum capital structure for the subject interest. Thecost of capital will generally be based on the following:a)Debt CapitalThe cost of debt capital can generally be determined based on the current borrowingrate (credit risk) of the Subject Interest. However, in cases where the Subject Interestdoes not have debt capital, the valuator can determine the cost of debt capital fromvarious sources that monitor the cost of debt capital including Mergerstat QuarterlyCost of Capital, Gold Sheets, etc.b)Equity CapitalThe cost of equity capital can generally be determined based on a build-up approach,CAPM, or published sources of cost of equity capital including Mergerstat QuarterlyCost of Capital, etc.4.Lack of Control InterestA lack of control interest cannot change the capital structure of the Company. If thevaluator uses Net Cash Flow to Invested Capital as a benefit stream in a DCF model with aconstant WACC where the capital structure is changing over the forecast period, the netpresent value of the future cash flows will be distorted by utilizing an inappropriateapplication of a constant WACC (when the cost of capital is constantly changing) as adiscount rate applied to the net cash flows to invested capital representative of a constantlychanging capital structure. The valuator should avoid using Net Cash Flow to InvestedCapital as a benefit stream in a DCF model when the capital structure is constantlychanging during the forecast period.5.Mid-Period vs. End-of-Period Discounting MethodThe method used for discounting a future benefit stream will depend on the availability ofthe cash flows to the equity holder. If the equity holder has access to the cash flowsthroughout the year, then the valuator should use a mid-period discounting method. If theequity holder only has access to the cash flows at the end of the year, then the valuatorshould use an end of period discounting method. 1995–2012 by National Association of Certified Valuators and Analysts (NACVA). All rights reserved.Used by Institute of Business Appraisers with permission of NACVA for limited purpose of collaborative training.Chapter Six – 92012.v1
COMMONLY USED METHODS OF VALUATIONFundamentals, Techniques & TheoryThe following illustration serves to underscore the point made here:End of period discounting:NPV sum of (cash flow at time t) / (1 discount rate) tMid-period discounting:NPV sum of (cash flow at time t) / (1 discount rate) t – 0.5Assume discount rate 40% per annum and that cash flows are received/paid throughout each period.DISCOUNT FACTOR USING:Period (t)NominalCash FlowMid-PeriodDiscountingPV USING:End PeriodDiscountingMid-PeriodDiscountingEnd PeriodDiscounting% ,6795,64485%NPVNET PRESENT VALUESource: International Valuation Handbook, Leadenhall Australia Limited, Adelaide, SouthAustralia, 2001C. GORDON GROWTH MODELThe Gordon Growth Model assumes that cash flows will grow at a uniform rate in perpetuity.Under this model, value can be calculated as:Present Value CFo (l g)k–gWhere,CFo Cash flow in period o (the period immediately preceding the valuation date.)k Discount rate (or cost of capital)g Expected long-term sustainable growth rate of the cash flow used (remember, in thecontext of valuation of closely held companies, valuation analysts will generally useeither Net Cash Flow to Equity or Net Cash Flow to Invested Capital)10 – Chapter Six2012.v1 1995–2011 by National Association of Certified Valuators and Analysts (NACVA). All rights reserved.Used by Institute of Business Appraisers with permission of NACVA for limited purpose of collaborative training.
Fundamentals, Techniques & TheoryCOMMONLY USED METHODS OF VALUATIONTwo-Stage Gordon Growth Model assumes that cash flow growth will change (the growth rateis not constant under this model, the present value is calculated as follows):Present Value CF1(l k) CF2(l k)2 . CFn(l k)n CFn (l g)k-g(l k)nWhere,CF1 CFn Cash flow expected in each of the periods one thru n, n is the last period of thecash flow projectionk Discount rates (or cost of capital)g Expected long-term sustainable growth rate of the cash flow used (remember, in thecontext of valuation of closely held companies, valuation analysts will generally useeither Net Cash Flow to Equity or Net Cash Flow to Invested Capital)In the two-stage model, the terminal year calculation (CFn (l g)/k-g/(l k)n) refers to the yearsduring which cash flows are expected to grow at a constant rate into perpetuity.1.Two Stage Model Using Mid-Year ConventionThe Capitalization and Discounting Models presented thus far assume Cash Flow (CF) isreceived at year-end. That assumption does not always hold. More often than not CF isreceived evenly throughout the year. In this situation, the use of the “mid-yearconvention” is appropriate.The mid-year convention, as opposed to the year-end convention always results in a highervalue since the investor receives the CF sooner. The Mid-year Discounting ConventionEquation is presented as follows:PV CF1(l k).5 CF2(l k)1.5 CF3(l k)2.5 . CFn(l k)n-0.5The Mid-year Capitalization Convention is written similarly to the traditional capitalizationconvention; however, it reflects the receipt of CF throughout the year:PV CF1(l k).5k-gThe Mid-year Convention in the two- stage model is written as follows:PV CF1(l k).5 CF2(l k)1.5 CF3(l k)2.5 . CFn (l k)n-0.5 1995–2012 by National Association of Certified Valuators and Analysts (NACVA). All rights reserved.Used by Institute of Business Appraisers with permission of NACVA for limited purpose of collaborative training.CFn (l g)k-g(l k)n 0.5Chapter Six – 112012.v1
COMMONLY USED METHODS OF VALUATIONFundamentals, Techniques & TheoryIV. MARKET APPROACHThe market approach is covered in a survey manner in this part of the course. The complexity andimportance of understanding this approach is to cover this topic in greater depth in separate material.What follows, therefore, is an overview of this important topic.The idea behind the market approach is that the value of a business can be determined by referenceto reasonably comparable guideline companies (“comps”) for which transaction values are known.The values may be known because these companies are publicly traded or because they wererecently sold and the terms of the transaction were disclosed.This approach is commonly used especially in contexts where the user(s) of the analyst’s report donot have specialized business valuation knowledge. There is an obvious parallel in a lay person’smind to consulting with a real estate agent prior to listing your home for sale to find out for whatamount similar homes in your neighborhood have sold. The market approach is the most commonapproach employed by real estate appraisers. Real estate appraisers generally have from several toeven hundreds of comps from which to choose.For a business valuation professional, a good set of comps may be as many as two or three – andsometimes no comparable company data can be found. (The objective of analyzing these componentsis to determine if the comparable company has a similar risk profile.) There are three sources ofcomparable company transaction data: Public company transactionsPrivate co
trademarks, trade names, logos, patents and goodwill. Thus, balance sheets prepared under GAAP make no attempt to either include or correctly measure the value of many assets. Thus, by definition, owners’ equity will not normally yield a va
i.e. the valuation models, can affect the accuracy of the forecast. Financial analysts can adopt several different valuation methods to evaluate companies, which are usually categorised into two different macro-classes: single-period valuation methods, i.e. market multiples, and multi-period valuation methods, such as discounted cash flow (DCF) and
Automated Valuation Models (AVMs) are computer-based systems which encompass all data concerning real estate in a particular area and are capable of producing more consistent valuation reports within a short time. Traditional valuation methods employed by valuers somewhat delay the valuation process. For
ing how well the estimates produced by exogenously imposed valuation models agree with stock prices. The problem is that the exogenously imposed valuation models, even if reasonable, are not the same as the actual models used by the . they use valuation methods that rely on trailing accounting information. Further-more, the adoption of .
medium-sized enterprises. The existing business valuation methods have been discussed in this research. In order to examine the accurate business valuation methods, a case study has been conducted, in which two case were studied. The results of the case study show that the DCF-methods are accurate business valuation methods.
We will teach 4 valuation methods Trading Comparables Transaction Comparables Sum-of-the-Parts Valuation Discounted Cash Flow Analysis (DCF) 2. Why is Valuation important? . The SCIENCE is performing the valuation, the ART is interpreting the results in order to arrive at the "right"price. TECHNOLOGY can help you do this more efficiently.
Classification makes it easier to understand where individual valuation models fit into the big . In the broadest possible terms, stock valuation methods fall into two main categories: absolute and relative valuation approaches. Absolute valuation attempts to find an intrinsic value of the stock based on company's fundamentals, such as .
Jun 15, 2016 · The discussions and examples in this Valuation Advisory make specific assumptions for 52 illustrative purposes only. While general principles have been provided for guidance to assist in the 53 valuation of customer-related assets, assumptions used in the valuation of any asset
Founded in 1807, John Wiley & Sons is the oldest independent publishing company in the . valuation and financial instrument analysis, as well as much more. . Introduction to Valuation 1 A Philosophical Basis for Valuation 1 Generalities about Valuation 2
