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MACHINERY AND EQUIPMENT APPRAISALS FINDING VALUE IN TOUGH TIMES.

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Presentation on theme: "MACHINERY AND EQUIPMENT APPRAISALS FINDING VALUE IN TOUGH TIMES."— Presentation transcript:

1 MACHINERY AND EQUIPMENT APPRAISALS FINDING VALUE IN TOUGH TIMES

2 WHO USES M/E APPRAISALS? Banks CPA’s Attorneys Business Sellers/Buyers Tax professionals Robert Brumbaugh & Associates 919-870-8258 www.appraisalsnc.com

3 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 Robert Brumbaugh & Associates 919-870-8258 www.appraisalsnc.com

4 HOW MUCH IS IT WORTH? Fair Market Value in Continued Use (FMV) Orderly Liquidation Value (OLV) Forced Liquidation Value (FLV) Robert Brumbaugh & Associates 919-870-8258 www.appraisalsnc.com

5 RESTAURANT FMV - Stays in Business - $250,000 OLV - Liquidate over 120 to 180 days - $125,000 FLV - Auction - $60,000 Robert Brumbaugh & Associates 919-870-8258 www.appraisalsnc.com

6 JUNGLE GYM FMV – Stays in Business - $70,000 OLV - $10,000 FLV - $5,000 Robert Brumbaugh & Associates 919-870-8258 www.appraisalsnc.com

7 THE ROLE OF OBSOLESCENCE Robert Brumbaugh & Associates 919-870-8258 www.appraisalsnc.com

8 ECONOMIC OBSOLESCENCE Due to uncontrollable external factors Example: A new runway expansion at airport creates new flight patterns and planes flying over homes Robert Brumbaugh & Associates 919-870-8258 www.appraisalsnc.com

9 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 Robert Brumbaugh & Associates 919-870-8258 www.appraisalsnc.com

10 PHYSICAL OBSOLESCENCE Expected Excessive use Misuse Age Maintenance Classes Computers – 3 years Trucks – 7 to 10 years Manufacturing – 20+ Robert Brumbaugh & Associates 919-870-8258 www.appraisalsnc.com

11 FINDING VALUE Income approach Market data approach Cost less depreciation approach Robert Brumbaugh & Associates 919-870-8258 www.appraisalsnc.com

12 INCOME APPROACH Not often used No direct comparables Shop built No invoices Convert future benefits to present value Income and expenses directly measured Robert Brumbaugh & Associates 919-870-8258 www.appraisalsnc.com

13 MARKET DATA APPROACH Actual/similar sales comparison Ebay Best Buy Robert Brumbaugh & Associates 919-870-8258 www.appraisalsnc.com

14 ONE OF A KIND MARKET DATA APPROACH Similar with same age Robbins Vermeer Ditch – Witch Invoice/ depreciation Robert Brumbaugh & Associates 919-870-8258 www.appraisalsnc.com

15 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) Robert Brumbaugh & Associates 919-870-8258 www.appraisalsnc.com

16 MACHINERY/EQUIPMENT APPRAISALS Same basic concepts as real estate Approaches, obsolescence, finding value What’s inside?Ask for help Always something new Certified/3 rd party appraisal may be important Robert Brumbaugh & Associates 919-870-8258 www.appraisalsnc.com

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