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Asset Valuation Techniques
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Precedent Transaction Analysis
This method estimates an asset's value based on the prices paid for similar assets in past transactions.
Adjusted Net Asset Method
This valuation technique involves adjusting the net assets of a company to reflect the current market values rather than book values.
Market Value
Market value refers to the current price at which an asset can be bought or sold in the marketplace.
Sum of the Parts
This method involves adding up the separate values of each component of a company to get the total asset value.
Cost Approach
The cost approach estimates the cost to replace an asset with a new one of similar functionality, assuming no economic obsolescence.
Fair Value
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.
Historical Cost
The historical cost method values assets at their original purchase cost, adjusted for depreciation or amortization.
Replacement Value
Replacement value is an estimate of the cost to replace an asset with a new one at current market prices, including installation and delivery.
Economic Value Added (EVA)
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.
Book Value
Book value is the value of an asset according to its balance sheet account balance, which is original cost minus accumulated depreciation.
Option Pricing Models
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.
Net Asset Value (NAV)
Net Asset Value is calculated by subtracting an entity's liabilities from its assets' values, often used for mutual and exchange-traded funds.
Comparable Company Analysis (CCA)
CCA involves comparing the company in question with similar companies based on valuation metrics to estimate the asset's value.
Income Approach
The income approach estimates value based on the expected future income that an asset can generate, discounted to present value.
Liquidation Value
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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