Here is a list of the types of values, their details and what situations they are needed for:

Approaches to Value

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

NOTE:  Make a diagram showing the following: