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- an unbiased and independent opinion of value.
Approaches to Value -
the three recognized approaches used in appraisal analysis. They
are as follows:
Cost Approach -
Calculation of value beginning with a determination of the
replacement cost of a new asset of the same or similar
utility, followed by deductions for all forms of depreciation
to the subject asset including; physical (age, condition),
technological obsolescence and economic obsolescence
Income Approach -
capitalization of current net income or projected net cash
flow and discounts those at a calculated rate to estimate
current value. This
is the least employed approach to value in single asset
appraisals of equipment.
Sales Comparison or Market
Approach - involves the collection of market sales data
pertaining to the subject assets being appraised in order
to determine the desirability of the assets through recent
sales or offerings of similar assets currently on the market
in order to derive the most probable selling price for the
assets being appraised. In
high tech technology, values change rapidly and little market
data may exist for certain assets.
Concepts of Value - appraisal
assignments often require more than one value. The appraiser,
before beginning the process will investigate the assignment
thoroughly in order to arrive at the concept that best suits
the situation and purpose of the appraisal assignment.
Some of the most common values are as follows:
Fair Market Value - the
estimated amount, expressed in terms of money, which may
reasonably be expected for a property in an exchange between
willing buyer and a willing seller, with equity to both,
neither under any compulsion to buy or sell, and both fully
aware of all relevant facts, as of a specific date.
Value In Place
& In Use -
same as the above but adds to it such costs as installation,
transportation, rigging, selling, expenses, commission and
Liquidation Value - the
estimated gross amount, expressed in terms of money, that
could typically be realized from a properly advertised and
conducted public auction, with
the seller being compelled to sell with a sense of immediacy
on an as-is, where-is basis, as of a specific date.
Orderly Liquidation Value -
the estimated gross amount, expressed in terms of money,
that could typically be realized from a liquidation sale,
given a reasonable period of time to find a purchaser(s),
with the seller being compelled to sell on an as-is,
where-is basis, as of a specific date.
Residual Value - the
projected value expected by a lessor at the termination of a
"fair market value" lease.
This value usually falls somewhere between the fair
market value and its orderly liquidation value and is based
upon the lessor's calculated expectations of the willingness
of the lessee to buy the equipment at its fair market value.
In the event the lessee elects to return the equipment,
the lessor is likely to dispose of the equipment at its
orderly liquidation value.