Continuation of previous post- 

For Calculating the Adjusted NAV, the valuer should factor in the contingent liability, Tax Shield on accumulated losses, impact of Auditor qualification and Due Diligence, money to be received from warrants, stock options and impact of corresponding shares.

Book Value Method

This form of valuation is based on the books of a business, where owners' equity i.e. total assets minus total liabilities are used to set a price. There are a couple of problems with this simplified method. First, unless you audit the business' books, you cannot be certain that the numbers presented are correct. Secondly, the value of some assets, such as buildings, equipment and furniture/fixtures, may be overstated in the books, and may not reflect the maintenance and/or replacement costs for older assets. As a result, most business valuation experts prefer to use an adjusted book value.

Liquidation Value Method

This method is similar to the book valuation method, except that the value of assets at liquidation is used instead of the book or market value of the assets. Using this method, the liabilities of the business are deducted from the liquidation value of the assets to determine the liquidation value of the business. The overall value of a business using this method should be lower than a valuation reached using the standard book or adjusted book methods. 

Replacement Value Method

This type of business valuation is similar to an adjusted book value analysis. Replacement value is different from liquidation/book value in as much as it uses the replacement value of assets rather the liquidation/book value of assets which is usually higher than book/liquidation value. Liabilities are deducted from the replacement value of the assets to determine the replacement value of the business.

Since the replacement methodology assumes the value of business as if a new business is being set up, this methodology may not be relevant in the case of valuation for a going concern.

To know how we can assist you with our Valuation Services, please contact:

Mr. Chander Sawhney
Vice President
Corporate Professionals
+911140622252, +919810557353

Mr. Maneesh Srivastava
Sr. Manager
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