© 2000 John Petroff
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© 2000 John Petroff |
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H- Valuation of real and human assets
In some cases, such as when a firm has just been formed, there is no reliable data to make predictions about sales or cash flows, let alone profits or dividends. Then, it may be necessary to derive a value from the assets the firm possesses. Generally speaking, real and human assets can be valued on the basis of the additional revenues or savings they are likely to generate. An artist, a sports champion or a talented expert are estimated on the basis of the discounted value of additional tickets or other products sales (net of expenses). Real estate is divided into undeveloped and developed, and only the latter can be evaluated for the most worthwhile use, given zoning, location, potential customer traffic and such other circumstances that are indicative of income opportunities. Human capital is usually far more important than real capital.
See review questions Q-3H.1 and Q-3H.2.
See research assignment R-3.22.
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