machinery and equipment appraisals finding value in tough times
TRANSCRIPT
WHO USES M/E APPRAISALS?
• Banks
• CPA’s
• Attorneys
• Business Sellers/Buyers
• Tax professionals
Robert Brumbaugh & Associates 919-870-8258 www.appraisalsnc.com
REASONS FOR APPRAISALS
• Buy/Sell Agreements• Insurable Value• Financing• Tax Purposes• Business Valuations• Divorce Settlements• Valuing Goodwill• Estate Settlements• SBA Loans
• Buyout Agreements• Gift Planning• Trust Agreements• Retirement Planning• Estate Valuations• 1031 Exchanges• Partnerships• Dissolutions• Litigation Support
Robert Brumbaugh & Associates 919-870-8258 www.appraisalsnc.com
HOW MUCH IS IT WORTH?
Fair Market Value in Continued Use (FMV)
Orderly Liquidation Value (OLV)
Forced Liquidation Value (FLV)
Robert Brumbaugh & Associates 919-870-8258 www.appraisalsnc.com
RESTAURANT
• FMV - Stays in Business - $250,000
• OLV - Liquidate over 120 to 180 days - $125,000
• FLV - Auction - $60,000
Robert Brumbaugh & Associates 919-870-8258 www.appraisalsnc.com
JUNGLE GYM
• FMV – Stays in Business - $70,000
• OLV - $10,000
• FLV - $5,000
Robert Brumbaugh & Associates 919-870-8258 www.appraisalsnc.com
ECONOMIC OBSOLESCENCE
• Due to uncontrollable external factors• Example: A new runway expansion at airport creates new
flight patterns and planes flying over homes
Robert Brumbaugh & Associates 919-870-8258 www.appraisalsnc.com
FUNCTIONAL OBSOLESCENCE
• Not complying with recognized utility • Features that are
not practical or desirable
• Real Estate – 1 car garage• Computers – hard
drive capacity• Televisions – flat
panel versus analog• Data processing –
$350k to $35k in 5 years
Robert Brumbaugh & Associates 919-870-8258 www.appraisalsnc.com
PHYSICAL OBSOLESCENCE
• Expected• Excessive use• Misuse• Age• Maintenance• Classes• Computers – 3 years• Trucks – 7 to 10 years• Manufacturing – 20+
Robert Brumbaugh & Associates 919-870-8258 www.appraisalsnc.com
FINDING VALUE
Income approach
Market data approach
Cost less depreciation approach
Robert Brumbaugh & Associates 919-870-8258 www.appraisalsnc.com
INCOME APPROACH
• Not often used
• No direct comparables
• Shop built
• No invoices
• Convert future benefits to present value
• Income and expenses directly measured
Robert Brumbaugh & Associates 919-870-8258 www.appraisalsnc.com
MARKET DATA APPROACH
• Actual/similar sales comparison
• Ebay
• Best Buy
Robert Brumbaugh & Associates 919-870-8258 www.appraisalsnc.com
ONE OF A KIND MARKET DATA APPROACH
• Similar with same age• Robbins• Vermeer• Ditch – Witch
• Invoice/ depreciation
Robert Brumbaugh & Associates 919-870-8258 www.appraisalsnc.com
COST APPROACH
• Assumes value of an asset cannot exceed cost to reconstruct or replace with another of like utility• Historical data
adjusted by inflation/depreciation to arrive at Reproduction Cost New (RCN)
Robert Brumbaugh & Associates 919-870-8258 www.appraisalsnc.com