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Finding Value In Tough Times

Finding Value In Tough Times. Machinery and Equipment Appraisals. Who uses m/e appraisals?. Banks CPA’s Attorneys Business Sellers/Buyers Tax professionals. Reasons for appraisals. Buy/Sell Agreements Insurable Value Financing Tax Purposes Business Valuations Divorce Settlements

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Finding Value In Tough Times

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  1. Finding Value In Tough Times Machinery and Equipment Appraisals

  2. Who uses m/e appraisals? • Banks • CPA’s • Attorneys • Business Sellers/Buyers • Tax professionals Robert Brumbaugh & Associates 919-870-8258 www.appraisalsnc.com

  3. 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

  4. 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

  5. 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

  6. Jungle Gym • FMV – Stays in Business - $70,000 • OLV - $10,000 • FLV - $5,000 Robert Brumbaugh & Associates 919-870-8258 www.appraisalsnc.com

  7. The role of obsolescence Robert Brumbaugh & Associates 919-870-8258 www.appraisalsnc.com

  8. 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

  9. 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

  10. 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

  11. Finding value Income approach Market data approach Cost less depreciation approach Robert Brumbaugh & Associates 919-870-8258 www.appraisalsnc.com

  12. 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

  13. Market data approach • Actual/similar sales comparison • Ebay • Best Buy Robert Brumbaugh & Associates 919-870-8258 www.appraisalsnc.com

  14. 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

  15. 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

  16. Machinery/equipment Appraisals • Same basic concepts as real estate • Approaches, obsolescence, finding value • What’s inside? Ask for help • Always something new • Certified/3rd party appraisal may be important Robert Brumbaugh & Associates 919-870-8258 www.appraisalsnc.com

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