If you use graphs in your reports, please be honest in the way in which you depict your data. I wish I could embed sample charts in this post, but alas, I cannot. So please bear with me and envision the following data series: 100, 101, 102, 103, 104, etc. plotted by year.
Chart A graphs the [...]
Have you ever used a probability distribution in an appraisal? If so, this post is for you!
If you haven’t, are you sure?
Really sure?
Methinks you have actually used one; in fact, you have used them in almost every single appraisal you have ever done! You just did not realize it. Here’s why.
Under the Income Approach, we [...]
Appraisal reports should discuss the implications of the underlying economic, industry, and company analyses for the valuation of the subject business and interest. If we do not do this, these sections appear to float untethered to the valuation analysis, and may be shown to conflict with our financial forecasts and / or cost of capital [...]
Value is a forward-looking proposition based on the Principle of Expected Benefits. When we use the Income Approach, benefits are measured by cash flow to equity or some other measure.
When companies are undergoing change due to external factors like a recession or internal ones like innovation, it can be impossible as of the valuation date [...]
Most of the time, when we receive inquiries about our services from gatekeepers (attorneys, accountants and other professionals who refer business to us), the caller gives us background on the purpose and use of the appraisal. This, plus a few more questions on our part, lets us establish the engagement parameters (standard and premise of [...]
In Ohio, my home state, the law is that marital assets are valued as of the separation date. Subsequent value changes are not part of the marital estate value.
Given that, what’s wrong with the following Income Approach valuation for divorce?
The appraiser estimated cash flow to equity by weighting five years’ prior cash flows 10%-10%-10%-35%-35%. The [...]
In each of the situations that follow, we appraised a non-marketable minority interest’s fair market value and concluded (with strong support) a combined (for lack of control and marketability) discount of (say) 25%.
For an estate or gift tax return. The client is worried about an IRS audit and wants to take a lower discount.
For a [...]
I haven’t been posting for a few weeks due to an extended vacation and as a result being swamped…several of you have emailed to check on me, and I appreciate it. If you have any suggestions for topics for me to discuss, do not hesitate to let me know!
In my favorite novel, Ayn Rand’s Atlas Shrugged, a philosophy professor constantly urges his students and others to “Check Your Premises” – to be aware of their fundamental assumptions.
In business valuation, our fundamental assumptions are the parameters of our engagement: identifying the client, the purpose and use of the appraisal, the size and type of [...]
Alpha Company’s shareholders have a problem. One is retiring and needs to be bought out. The shareholders have agreed that Alpha will buy the shares (for cash). They also agree on the value of the stock before the buyout. Everything is cool, except for one thing. The remaining shareholders think the buyout price should be [...]
