Welcome to Scribd, the world's digital library. Read, publish, and share books and documents. See more
Download
Standard view
Full view
of .
Look up keyword
Like this
0Activity
0 of .
Results for:
No results containing your search query
P. 1
PM Methodology

PM Methodology

Ratings: (0)|Views: 0|Likes:
Published by Nguyen Anh Vu

More info:

Published by: Nguyen Anh Vu on Aug 01, 2012
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as PDF, TXT or read online from Scribd
See more
See less

05/13/2014

pdf

text

original

 
 - 1 -
VALUATION METHODOLOGY
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.
 
 - 2 -
 Replacement Cost New
is the amount required to replace property with a modern new unitutilizing the most current technology and construction materials that will duplicate the productcapacity and utility of an existing unit at current market prices for materials, labour andmanufactured equipment, contractor’s overhead and profit, and fees, but without provision forovertime or bonuses for labour and premiums for material or equipment based upon replacingthe entire property at one time.
Physical Depreciation
– the loss in value or usefulness of a property due to the using up orexpiration of its useful life caused by wear and tear, deterioration, exposure to various elements,physical stresses, and similar factors
Functional Obsolescence
– the loss in value or usefulness of a property caused by inefficienciesor in adequacies of the property itself, when compared to a more efficient or less costlyreplacement property than new technology has developed.
 Economic Obsolescence
– the loss in value or usefulness of a property caused by factors externalto the assets. These factors include increased cost of raw materials, labour or utilities, reduceddemand for the product; increased competition; environmental or other regulation: or similarfactors.
 
 - 3 -
ANALYSIS
In accordance to valuation procedures, all valuation approaches must be considered, as one ormore approaches may be applicable to the subject asset. In certain situations, elements of thethree approaches may be combined to reach a value conclusion. However, the relativestrength, applicability, and significance of the approaches and their resulting values must beanalyzed and reconciled.In estimating the value of the assets, the market approach was primarily utilized for those assetswhere an active secondary market exists. Verified market comparables is the best proof of transacted value as it reflects the dynamics of secondary market. Factors such as the availabilityand desirability of particular types of machines are vital consideration, as supply and demand isan influencing factor on the transactions.For all other assets without active secondary market, we relied on the cost approach, where anestimate is made on the cost of reproduction new or replacement cost, less allowance fordepreciation or loss of value arising from condition, utility, age, wear and tear, andobsolescence, taking into consideration past and present maintenance policy, and rebuildinghistory, if any, and current utilization.In situation where we can identify and collect sufficient data on certain equipment that hasdirect contribution to the revenue generation, the income approach will be applied as part of the cross-checking procedure with the result from the cost approach and the market approachin arriving at our conclusion of value.

You're Reading a Free Preview

Download
scribd
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->