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Asset Valuation Techniques

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Historical Cost

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The historical cost method values assets at their original purchase cost, adjusted for depreciation or amortization.

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Market Value

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Market value refers to the current price at which an asset can be bought or sold in the marketplace.

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Net Asset Value (NAV)

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Net Asset Value is calculated by subtracting an entity's liabilities from its assets' values, often used for mutual and exchange-traded funds.

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Cost Approach

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The cost approach estimates the cost to replace an asset with a new one of similar functionality, assuming no economic obsolescence.

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Income Approach

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The income approach estimates value based on the expected future income that an asset can generate, discounted to present value.

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Comparable Company Analysis (CCA)

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CCA involves comparing the company in question with similar companies based on valuation metrics to estimate the asset's value.

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Precedent Transaction Analysis

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This method estimates an asset's value based on the prices paid for similar assets in past transactions.

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Liquidation Value

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Liquidation value is the expected amount that would be generated if an asset or a company's assets were sold off individually.

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Replacement Value

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Replacement value is an estimate of the cost to replace an asset with a new one at current market prices, including installation and delivery.

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Book Value

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Book value is the value of an asset according to its balance sheet account balance, which is original cost minus accumulated depreciation.

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Economic Value Added (EVA)

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EVA is a measure of a company's financial performance based on residual wealth, calculated by subtracting a firm's cost of capital from its net operating profit.

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Fair Value

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Fair value is an estimate of the price at which an asset would change hands between willing parties, not under duress, commonly used in financial reporting.

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Sum of the Parts

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This method involves adding up the separate values of each component of a company to get the total asset value.

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Option Pricing Models

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These quantitative techniques, such as the Black-Scholes model, are used to value financial derivatives based on the volatility and price of the underlying asset.

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Adjusted Net Asset Method

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This valuation technique involves adjusting the net assets of a company to reflect the current market values rather than book values.

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