Financial Valuation Workbook, 5th Edition

CHAPTER 5Income Approach Valuation Process Flowchart

5.1 INTRODUCTION

The Income Approach Valuation Process Flowchart presented here provides valuation analysts with a structured process to assist in the proper application of the income approach. For less experienced analysts, it provides guidance in selecting and supporting the various methods and assumptions used in the income approach. Use of this flowchart will encourage good documentation of the reasons the approach was applied in the manner ultimately determined.

The Income Approach Valuation Process Flowchart is presented in outline form for ease of adaptation to a checklist for compliance. It suggests a series of questions to answer and concepts to consider when preparing the income approach. The cost of capital topic is not part of this guide.

5.2 INCOME APPROACH VALUATION PROCESS FLOWCHART

Disclaimer Excluding Any Warranties: This Income Approach Valuation Process Flowchart is designed to provide guidance to analysts, auditors, and management, but it is not to be used as a substitute for professional judgment. This guide does not include nor address all the considerations and assumptions in a valuation. These procedures must be altered to fit each assignment; the various factors listed in this flowchart may not be necessary for every valuation. The practitioner takes sole responsibility for implementation of this guide. The implied warranties of merchantability and fitness of purpose and all other warranties, whether ...