finding value in tough times

MACHINERY AND EQUIPMENT APPRAISALS

FINDING VALUE IN TOUGH TIMES

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


HOW MUCH IS IT WORTH?

Fair Market Value in Continued Use (FMV)

Orderly Liquidation Value (OLV)

Forced Liquidation Value (FLV)


RESTAURANT

• FMV - Stays in Business - $250,000

• OLV - Liquidate over 120 to 180 days - $125,000

• FLV - Auction - $60,000


JUNGLE GYM

• FMV – Stays in Business - $70,000

• OLV - $10,000

• FLV - $5,000


THE ROLE OF OBSOLESCENCE


ECONOMIC OBSOLESCENCE

• Due to uncontrollable external factors• Example: A new runway expansion at airport creates new

flight patterns and planes flying over homes


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


PHYSICAL OBSOLESCENCE

• Expected• Excessive use• Misuse• Age• Maintenance• Classes• Computers – 3 years• Trucks – 7 to 10 years• Manufacturing – 20+


FINDING VALUE

Income approach

Market data approach

Cost less depreciation approach


INCOME APPROACH

• Not often used

• No direct comparables

• Shop built

• No invoices

• Convert future benefits to present value

• Income and expenses directly measured


MARKET DATA APPROACH

• Actual/similar sales comparison

• Ebay

• Best Buy


ONE OF A KIND MARKET DATA APPROACH

• Similar with same age• Robbins• Vermeer• Ditch – Witch

• Invoice/ depreciation


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)


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


finding value in tough times

Documents

fair market value

present valueincome

flv auction

new runway expansion

new flight patterns

desirable real estate

analogdata processing

recognized utility features