business-valuation-methods

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1、BUSINESSVALUATIONMETHODS(AllValuationsMUSTBEbasedonHistoricalData)I.AdjustedBookValueTaketheBookValueofnetworth-assetsnotacquired+liabilitiesnotassumed+fairmarketvalueofassetsacquired+anynetworthadjustments=AdjustedBookValue____________________________________________

2、________________II.CapitalizedAdjustedEarningsFirstStep:AdjustHistoricalEarningsSeller’sDiscretionaryLastCashFlowYearNetProfit50.0+Officer’ssalary+70.0+Discretionaryexpenses+30.0-NewOwnersalary-60.0AdjustedProfit90.0SecondStep:Gettheadjustedprofitsfor5yearsthendoaWeig

3、htedAverageoftheAdjustingEarningsYearEarningsWeightAdjusted95$501$5096$302$6097$703$21098$604$24099$905$450Totals15$1,010/15Average$67(rounded)ThirdStep:CalculateaDiscountRateDetermineT-BillRate5.0%DetermineOffsetRiskRate12.0%√Establishrateofreturnbasedonriskfactors√E

4、stablishrateofreturnbasedongeneraleconomyDetermineOffsetIlliquidityRate3.0%TotaltheRates20.0%FourthStep:Taketheweightedaverageoftheadjustedearningsanddividebythediscountrate.Example:$67/.20=$335___________________________________________________________________III.Dis

5、countedFutureEarningsFirstStep:AdjustHistoricalEarningsLastYearNetProfit50.0+Officer’ssalary+70.0+Discretionaryexpenses+30.0-NewOwnersalary-60.0AdjustedProfit90.0SecondStep:Gettheadjustedprofitsfor5yearsthendoaWeightedAverageoftheAdjustingEarningsYearEarningsWeightAdj

6、usted95$501$5096$302$6097$703$21098$604$24099$905$450Totals15$1,010/15Average$67(rounded)ThirdStep:DeterminethediscountrateDetermineT-BillRate7.0%DetermineOffsetRiskRate12.0%√Establishrateofreturnbasedonriskfactors√EstablishrateofreturnbasedongeneraleconomyDetermineOf

7、fsetIlliquidityRate6.0%TotaltheRates25.0%FourthStep:Estimategrowth,bothrealandinflationary(forthisexample,weareestimatinga5%growthrate).FifthStep:Multiplytheestimatedearningsforeachyearbytheestimatedgrowthrateuntilestimatedearningsforthenexttenyearsaredetermined.Sixth

8、Step:Multiplytheadjusted,weightedearningsbytheestimatedgrowth(1plusthegrowthrate)todeterminetheestimatedearningsforthefirsty