Reference no: EM132965381

Asset Valuation

Problem 1: When valuing assets many difficulties can arise. What is a hard-to-value asset or situation where the asset's value might be compromised because of the factors surrounding the ownership transfer.

Problem 2: What is the hard-to-value asset or situation of compromised asset value that that is being evaluated?

Problem 3: Describe the factors that make the asset hard to value.

Problem 4: Which of the three levels of inputs would need to be applied in order to help find the asset valuation?

Input Levels:

Level 1 Inputs are the market prices of identical assets in active markets. Level 1 inputs are viewed as highly reliable, but are rarely available for assets other than financial assets using standardized contracts.

Level 2 Inputs are market prices for similar assets. Level 2 inputs are viewed as reasonably reliable, but it takes judgment to adjust an observed price for differences between the asset that actually was traded and the asset that hypothetically will be traded. There may also be differences in the market itself, if the actual trade took place in a market that was not very orderly.

Level 3 Inputs provide estimates of value using modeling or other methods not drawn from prices of identical or similar assets. A Net Present Value computation is one very common level 3 input and a method that values the future cash flows generated by the asset. This will be explored in more detail in the upcoming pages.