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There are three generally accepted approaches to value, namely:
The Market Approach
The market approach considers prices recently paid for similar assets, with adjustments madeto the indicated market prices to reflect condition and utility of the appraised machinery andequipment relative to the market comparative. Assets for which there is an established usedmarket may be appraised by this approach.
The Income Approach
The income approach is the present worth of the future economic benefits of ownership. Thisapproach is generally applied to an aggregation of assets that consists of all assets of abusiness enterprise including working capital and tangible and intangible assets.
The Cost Approach
The cost approach considers the cost to reproduce or replace in new condition the assetsappraised in accordance with current market prices for similar assets, with allowance foraccrued depreciation arising from condition, utility, age, wear and tear, or obsolescencepresent (physical, functional or economical), taking into consideration past and presentmaintenance policy and rebuilding history. The cost approach generally furnishes the mostreliable indication of value for assets without a known used market.
Reproduction Cost New
- is the estimated amount of money needed to acquire in like kind andin new condition an asset or group of assets taking into consideration current prices of materials, manufactured equipment, labour, contractor's overhead, profit and fees, and allother attendant costs associated with its acquisition, but without provision for overtime orbonuses for labour and premium for materials.