Precision Valuation Draft 290609 (dragged) 3

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1、DraftAvailableapproachesAvailableapproachesTherearevariousmethodsapplicabletothevaluationofanasset/company,allofwhichcanbeclassifiedintothefollowingapproaches:Ñmarketapproach;Ñincomeapproach;andÑcostapproach.MarketapproachThemarketapproachdeterminesthevaluebasedon

2、quotedmarketpricesobservedinanactivemarket.Anactivemarketfulfilsallofthefollowingconditions:Ñtheitemstradedwithinthemarketarehomogenous;Ñwillingbuyersandsellerscannormallybefoundatanytime;andÑpricesareavailabletothepublic.Itofteninvolvescapitalisingrepresentativee

3、arningsofabusinessatanappropriatecapitalisationmultiple.Thecapitalisationmultiplereflectsthepurchaser'srequiredrateofreturn,therisksinherentinthebusiness,futuregrowthpossibilities,andalternativeinvestmentopportunities.Indeterminingtheappropriatecapitalisationratet

4、oapply,therearegenerallytwoapproachesadopted.Oneapproachistodeterminethemultiplesimpliedintransactionsinvolvingtheacquisitionofwholecompanies,whichcanbeconsideredreasonablycomparabletothatbeinganalysed(theGuidelineTransactionApproach).Adjustmentsaremadetocompensat

5、efordifferencesbetweenthecomparablebusinessesandthebusinessbeingvalued.Thesecondapproachistodeterminetheimpliedmultiplesofearningsthatinvestorspayforminorityholdingsonthequotedmarket(theGuidelineCompanyApproach).Thekeydistinctionbetweenthetwoapproachesisthattheimp

6、liedmultipledeterminedfrompricespaidfortheacquisitionofthewholecompanygenerallyincludesapremiumforcontrolandotherstrategicfactorsdrivingaparticulartransactionsuchas:rationalisationandsynergybenefitsavailabletoacquirers.Multiplesderivedfrompricespaidforminorityhold

7、ingsdonotgenerallyreflectsuchfactorsandwillneedadjustmenttoreflectatleastcontrol.IncomeapproachTheincomeapproachisbasedontheassumptionthatthevalueofanasset/companyisdeterminedbyitsabilitytogeneratefuturecash-flows.1729June2009Valuationoverview:AvailableapproachesP

8、recisionValuationDraft290609DraftAvailableapproachesTheincomeapproachinvolvestwosteps.First,aforecastoftheestimatedfuturenetcash-flowsexpectedtoaccruedi