Equipment
Appraisers Inc. applies three main approaches to value. In the valuation process,
all approaches are considered, and usually, one or two
are applied (depending on the asset). This guarantees
a well researched, documented approach to value that
could be relied upon by all intended users.
Sales / Market Approach
Values can be estimated by comparing
the subject with similar items that have recently sold
or are currently offered for sale in the marketplace. Within
these items, factors such as capacity, age, location,
date of sale, are all adjusted towards the subject property
inorder to arrive at a reasonable value. This approach
is the preferred when many sales of like items have occurred
in the marketplace as all factors of depreciation have
been included in those prices.
Cost Approach
This is an estimate of present replacement
cost of the subject less all accrued depreciation. Depreciation
includes loss in value due to physical deterioration,
functional and economic obsolescence. This approach
must be performed by a knowledgeable appraiser as he
is predicting adjustments made by the marketplace. This
approach is employed when sales data is not available
for like items. This is usually the preferred approach
to value plants, specialized machinery and equipment,
and software.
Income Approach
This is an application of the capitalization
of the future income the item will produce. In order
to apply this approach, a clear indication of the income
from the asset is required along with all the support
equipment and other costs incurred. This approach is
used once sales comparison is not available and it is
more appropriate than applying the cost approach. Typical
uses are for rental equipment (construction, transportation),
Patents and certain software applications.
Research
Research is the primary component
of all our valuations. For a typical engagement, we
spend an average of 3 days to 1 when comparing research
to the actual site inspection. As a company, we spend
hundreds of man hours a year to add to our database of
comparables and other research which directly impacts
our valuation process. We have a comprehensive inhouse
tool to help our appraisers’ value assets called the
Asset Valuation Engine (ASE). This tool is constantly
maintained and inputted with comparables sales of assets
from auctions and brokers throughout North America.
Here is a list of tools and sources
we utilize to help derive our conclusions:
Asset Valuation Engine
Auctions
Internet Sales
Broker Data
Trade Journals
Price Lists
Manufacturers
Used Dealers
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