MARKET APPROACH METHOD

MARKET APPROACH METHOD

Presented by: Angie Vanessa Pescador Peláez Group: 212032_119 Date: October 2022

DEFINITION:

The market approach is a method of determining the value of an asset based on the selling price of similar assets. It is one of the three most popular valuation methods, along with the cash flow and discounted cost analysis approach.

How is it calculated?

It will be calculated based on the estimated time of exposure in the market, using the present value method, estimated at the capitalization rate for the type of property.

EXAMPLE:

Since the market approach applies to non-reproducible goods, it is necessary to conduct a market study and then apply any of the following methods: - Comparative Factors Method (for land only). - Simple Regression. - Multiple Regression. The market study includes the following aspects: - Transaction research (actual sales, public records, etc.). - Investigation of bid values. - Criteria of professionals (financial institutions, real estate brokers, etc.). - Interviews with owners. Limitations - Data issues: credibility, reliability, veracity. - Determines a range of values

How can companies create value from their innovation?

To achieve this, process-based management can be chosen, resulting in improved quality, competitiveness and profitability of the business. It is important to note that innovation should not be understood only as the generation of products or services, but can also involve new business models or better business practices.